2 JULY 1987 - DTIC · resume the official talks between the two countries. The Angolans broke off talks with the United States in March 1986, after Washington began delivering military

JPRS-CAR-87-014 2220172 JULY 1987

A4*' FOREIGNBROADCASTINFORMATIONSERVICE

___JPRS Report-

China'

OMYION STA A

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6

JPRS-CAR-87-O14

2 JULY 1987

CHINA

CONTENTS

INTERNATIONAL

GENERAL

World Food Council Adopts 'Beijing Declaration'(XINHUA, 11 Jun 87) .....................................

Venice Summit Documents Gloss Over Differences(XINHUA, 11 Jun 87) .2.................................

U.S., Angolan Officials Hold Talks in. Washington(XINHUA, 13 Jun 87) ........................................ 4

U.S. Plans More Military Aid to Angolan Rebels

(XINHUA, 11 Jun 87) ............ ........................ 5

U.S. Condemns South Africa Extending Emergenby(XINHUA, 12 Jun 87) ................. ;;.......... .... 6

NORTHEAST ASIA

LIAOWANG Details Kim Il-song's Visit tb PRC(Liu Jinghuai; LIAOWANG, No 22, 1 Jun 87) 7

POLITICAL

Promotion of Youriger Leaders, Officials Continues(XINHUA, 8 Jun 87) ........... 1........... e .... ....... 0

-a-

ECONOMIC

NATIONAL AFFAIRS, POLICY

Lin Zongtang Examines Lateral Economic Ties(Lin Zongtang; JINGJI RIBAO, 5 Jan 87) .................. 11

Economists Offer Different Views on 1986 Performance(Xiao Qing; JINGJIXUE ZHOUBAO, 19 Apr 87) ............... 15

Beijing Experts Discuss Price Reform(SHIJIE JINGJI DAOBAO, 2 Mar 87) ........................... 18

State Guidance Pricing Discussed(Lin Bifang; JIAGE YUEKAN, No 12, 15 Dec 86) ............ 20

SMALL-SCALE ENTERPRISES

Township Enterprise Contract Responsibility System Viewed(Pu Changxing; NONGYE JINGJI WENTI, No 12, 23 Dec 86) ... 24

FOREIGN TRADE, INVESTMENT

Official Says Tourism To Undergo Major Reform(XINHUA, 9 Jun 87) ......................................... 30

Loans for Foreign-Funded Enterprises(XINHUA, 8 Jun 87) .. .................................... 31

State Improves Supplies for Joint Ventures(XINHUA, 8 Jun 87) ....................................... 33

Companies To Ensure Supplies To Joint Ventures(Wang Yanping; CHINA DAILY, 8 Jun 87) ................... 35

Foreign Managers Discuss Joint Ventures(XINHUA, 8 Jun 87) ......................................... 37

More Foreign TV Programs To Be Aired(Wen Jia; CHINA DAILY, 8 Jun 87) ........................... 38

Tianjin Approved To Attract More Foreign Funds(XINHUA, 8 Jun 87) ......................................... 40

SPECIAL ECONOMIC ZONES

Tianjin Mayor Addresses Press Conference on Opening(XINHUA, 8 Jun 87) ............... ....................... 42

Ninlgbo Port'City To Boost Export-Oriented Economy(XINHUA, 5 Jun 87) ......................................... 44

• - ' - b -

AGRICULTURE

Chen Yaobang Says Autumn Crops Growing Well(XINHUA, 10 Jun 87) ........................................ 45

Ecologically Balanced Agriculture Urged(XINHUA, 7 Jun 87) ......................................... 46

State Planning Commission on Agricultural Work

(Zhou Yichang; XINHUA Domestic Service, 2 Jun 87) ........ 47

Production Bases Boost Farm Output, Exports

(XINHUA, 9 Jun 87) ......................................... 49

Readjustment of Rural Industrial Structure Urged

(Yu Zongyi; HEILONGJIANG RIBAO, 5 May 87) ............... 50

Control of Failing Supply, Marketing Cooperatives(NONGCUN JINRONG, 16 Mar 87) ............................... 53

Measures To Manage Projects in Poor Areas(XINHUA Domestic Service, 8 Jun 87) ..................... 57

Two Price System for Grain Procurement, Sales Urged

(Cai Guoxin; JINGJIXUE ZHOUBAO, 26 Apr 87) .............. 59

Greater Production Specialization, More Commodity Production(Tong Nong, Zhang Xiaoou; NONGMIN RIBAO, 1 May 87) ...... 63

Ideas for Bigger Payoff From Investment in Agriculture

(Lei Xilu, Ma Xiaohe; NONGYE JINGJI XIAOGUO, No 2,25 Apr 87) ................................................. 65

Anhui To Set Up More Grain Bases

(ANHUI RIBAO, 28 Apr 87) ................................... 73

Foreign Funds Help Mechanization in Heilongjiang(XINHUA, 7 Jun 87) ......................................... 74

Hunan Uses Bacteria To Raise Farm Output(XINHUA, 20 May 87) ........................................ 76

Shandong Credit Cooperatives Develop

(Shen Jiaao, Liu Zeliang; NONGCUN JINRONG, 16 Mar 87) ... 77

Sichuan Tobacco Sales(Yang Xiaohan; SICHUAN RIBAO, 7 May 87) ................. 81

BriefsDairy Cattle 82Sichuan Farm Machine Sales 82

Tianjin Farm Machine Sales 82Yunnan Sugar Output 82Hubei Farm Product Sales 82

SOCIAL

Culture Ministry Urges Protection of Relics(XINHUA, 8 Jun 87) ........................................ 83

BriefsNew Publishing House 84

MILITARY, PUBLIC SECURITY

Jinan MR Leader Song Qingwei Speaks on Army-Civilian Unity(Shandong Provincial Service, 9 Jun 87) ................. 85

Air Force Trains Pilots for Foreign Countries(XINHUA, 10 Jun 87) ........................................ 86

PLA Navy Improves Ocean Going Logistics(Huang Caihong; XINHUA Domestic Service, 6 Jun 87) ...... 87

LIAOWANG Outlines Growth of PLA Air Force Missile Unit(Cai Shanwu; LIAOWANG OVERSEAS EDITION, No 23, 8 Jun 87) 89

PLA Develops New Artillery Command System(Guo Jianyao; GUANGMING RIBAO, 25 May 87) ............... 91

BriefsParatroopers Now All Weather Force 92Administrative Costs Cut 92Jiagxi MD Trains County Cadres 92

REGIONAL

SOUTHWEST REGION

Chengdu Announces Results of Crackdown on Crime(Sichuan Provincial Service, 7 Jun 87) .................. 93

RENMIN RIBAO Lauds Model School in Wuhan(Liu Xueyan; RENMIN RIBAO, 22 May 87) ................... 95

Henan Circular on Party Members' Vanguard Role(Henan Provincial Service, 4 Jun 87) .................... 97

BriefsStudy Course in Sichuan 99

S- ~d -

NORTHWEST REGION

Xinjiang Holds United Front, Nationalities Work Conference(Xinjiang Regional Service, various dates) ............... 100

Yan Mingfu Addresses Meeting. 100

Editorial Promotes Nationality Work 101

Ismail Amat Promotes Nationality.Solidarity 102

HONG KONG, MACAO

ZTS Comments on Hong Kong Political Reform(Qi Jing; ZHONGGUO TONGXUN SHE, 5 Jun 87) ................. 103

/7310

Se

GENERAL INTERNATIONAL

WORLD FOOD COUNCIL ADOPTS 'BEIJING DECLARATION'

OWl12000 Beijing XINHUA in English 1637 GMT 11 Jun 87

[Excerpt] Beijing, 11 June (XINHUA)--The 13th session of the World FoodCouncil ended here today with the adoption of the "Beijing Declaration".

As the third declaration adopted by the WFC since its founding in 1975,the Beijing Declaration draws the attention of the international communityto the growing number of human lives lost to hunger and malnutrition,one of the worst scourges in the world.

It also notes, however, that, in the light of the experience of a numberof developing countries, mankind can feed itself if it adopts the propermeans.

The declaration calls upon those responsible for national economicadjustment programs to give priority to the requirements of integratedrural development.

It urges the developed countries and major financial bodies to take intoconsideration the great difficulties of developing countries in repayingtheir debts and to set up the necessary financial instruments fornational economic recovery.

It urges those responsible for trade negotiations to re-establish ahealthy and equitable exchange of agricultural products and to allow thefair participation of developing countries.

It also suggests that governments and international organizations shouldfurther encourage regional and south-south cooperation, particularly insupport of food production, agro-industries, trade and management, andinstitution-building.

Representatives from 34 of the 36 member states of the WFC, the onlyministerial agency in the United Nations, and representatives andobservers from many other countries and international organizationsattended the four-day session.

The Chinese government attached great importance to the session, withacting Premier Wan Li making a speech at the opening ceremony and PresidentLi Xiannian meeting with representatives.

/12858CSO: 4000/102 1


VENICE SUMMIT DOCUMENTS GLOSS OVER DIFFERENCES

OW110648 Beijing XINHUA in English 0611 GMT 11 Jun 87

["Economic Summit: Many Documents but Few Results"--XINHUA headline]

[Text] Venice, Italy, 10 June (XINHUA)--The three-day 13th summit ofseven Western industrialized countries, which ended here today, impressedobservers with as many as seven documents but few substantial results.

The seven documents, a figure rarely seen at previous summits, onEast-West relations, the Gulf War, terrorism, economic issues, politicalissues and AIDS and drug problems, were published obviously to create anatmosphere necessary for making the meeting look successful.

Actually, the meeting proved to be one with no real winners or losers.However, each of the summiteers can go home telling people about thelimited achievements at the three-day summit meeting.

Sure, the participants have identical views on a number of major issuesin the world today. What is strange is that, according to the documents,they seemed to be identical on the issues over which they seriously differwith one another.

A careful study of these documents suggests, however, that they failedto solve the difference on many issues, particularly economic ones.

Against the bakcground of a slowing Western economy threatened by a futureof recession, the United States has asked Japan and Federal Germany toinject more life to the economy of the West as a whole.

In response, Japan and Federal Germany request the Americans to try toreduce their financial deficits.

But the economic document issued Wednesday tries to cover up the opposingviews with carefully chosen words.

The document said Japan should do more to open its domestic marketwhile Federal Germany should work hard to stimulate its domestic economy.

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Meanwhile, the document said, the United States should do its bit bycutting its budget deficit. Thus the document glossed over the differencebetween the two sides.

In fact, it is reported that, in a private meeting, Federal GermanChancellor Helmut Kohl turned down U.S. President Ronald Reagan's requestto lower the interest rates to stimulate the economy.

President Reagan also failed to win support from Western Europe for hisinitiative on eliminating government subsidies to agricultural products.

In this respect, the document just talked in generality about farmcommodities, saying the summiteers agreed to gradually reduce the subsidiesthrough coordination.

The participants agreed that economic indicators shall be used tostrengthen their policy coordination and that their finance ministersshould meet at least three times a year.

But the coordination will not bind the seven countries. Each country willimplement the agreement only when it deems the coordination in conformitywith its interests.

In the document, the leaders of the seven countries also pledged toprovide more official financial aid to debtor countries. The documentdivided Third World debtor countries into two groups--low-income andhigh-income countries.

According to the document, the leaders promised to offer to the firstgroup preferential interests and help reschedule the repayment or cancelthe debt.

Reporters from Third World debtor countries here commented that theywould wait and see whether the promise would be fulfilled.

/l2858CSO: 4000/102

3


U.S., ANGOLAN OFFICIALS HOLD TALKS IN WASHINGTON

0W130630 Beijing XINHUA in English 0619 GMT 13 Jun 87

[Excerpt] Washington, 12 June (XINHUA)--Chester Crocker, assistantU.S. secretary of state for African affairs, and an Angolan delegationThursday held an informal meeting to discuss relations between the twocountries, the State Department said today.

Both Angolan and U.S. officials said the meeting did not mark a formalresumption of negotiations over foreign troops withdrawal from Angola.

The high-level Angolan delegation, led by Angola's reported No 2 figurePedro de Castro Van-dunem, was here on a private visit.

At a news conference Thursday, Van-dunem said his country is "completelyopen" to discussions with the United States.

The next session of the negotiations is scheduled to be resumed withinthe next few weeks in Luanda, capital of Angola U.S. sources said.

Crocker and Angolan government representatives met in Brazzaville, capitalof the Congo, in April for the first time in more than a year trying toresume the official talks between the two countries.

The Angolans broke off talks with the United States in March 1986, afterWashington began delivering military aid to Angola's anti-governmentforces, the National Union for the Total Independence of Angola (UNITA)led by Jonas Savimbi.

The United States decided this week to provide at least $15 million inadditional military aid to the UNITA this year. The new package of aidwill be in the form of military hardware, including Stinger anti-aircraftmissiles.

/12858CSO: 4000/102

4


U.S. PLANS MORE MILITARY AID TO ANGOLAN REBELS


[Excerpt] Washington, 11 June (XINHUA)--The Reagan Administrationhas informed Congress that it has decided to provide at least $15 millionin additional military aid to the Angolan anti-government forces, accordingto U.S. officials.

The officials, quoted in a report published in the NEW YORK TIMES today,said the new package of aid this year to the National Union for the TotalLiberation of Angola (UNITA) headed by Jonas Savimbi, will be in the formof military hardware, including Stinger anti-aircraft missiles.

In addition to Stinger missiles, the UNITA forces are to receive somevariety of anti-tank missiles to counter so-called new shipment of Soviettanks to the Luanda government forces.

The U.S. officials said that providing military aid to the UNITA wouldput pressure on the Luanda government to seek a settlement of the12-year-old civil war and to send home foreign troops as part of apackage intended to lead to independence for Namibia.

It's noted that while the United States is providing military aid to theUNITA forces, it is trying to improve relations with the government ofAngola.

A senior State Department official met with Angolan government representativesin April for the first time in more than a year to try to resume theofficial talks between the two countries which were broken off afterWashington began delivering military aid to the UNITA forces.

/12858CSO: 4000/102

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U.S. CONDEMNS SOUTH AFRICA EXTENDING EMERGENCY


[Text] Washington, 11 June (XINHUA)--The United States today condemnedSouth Africa's decision to extend the state of emergency for another year.

"We have consistently maintained that we saw no justification for the firststate of emergency in South Africa," State Department spokeswoman PhyllisOakley said. "We see no justification for the extension of the currentstate of emergency."

The spokeswoman said the South African "activities and decisions show alack of appreciation for the fundamental causes of unrest and violencethere. The reinstatement of these measures will only continue to undermineopportunities for dialogue, which could lead to a resolution of SouthAfrica's internal problems."

The Pretoria authority announced Wednesday to extend the country's stateof emergency for a second year.

The current state of emergency, which was imposed last 12 June amidstgrowing resistance in black townships against minority white rule, expiresat midnight Thursday.

The state of emergency, during which an estimated total of 30,000 personshave been detained, bans all unauthorized meetings and gives sweepingpowers to police to detain suspected "subversives indefinitely withoutbringing charges."

It also led to the most severe press restrictions in the world.

Although the United States condemns the extension of emergency in SouthAfrica, observers here take note of the fact that over long years theU.S. has been strongly opposed to the imposition by the internationalcommunity of comprehensive economic sanctions against the Pretoria regime.

/12858CSO: 4000/102

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NORTHEAST ASIA INTERNATIONAL

LIAOWANG DETAILS KIM IL-SONG'S VISIT TO PRC

HK100805 Beijing LIAOWANG in Chinese No 22, 1 Jun 87 p 5

[Article by Liu Jinghuai (0491 2417 2037): "Everlasting Friendship"]

[Text] On the morning of 22 May, Deng Xiaoping, chairman of the CPCCentral Committee Advisory Commission, gave a banquet in honor of KimIl-song, general secretary of the Workers Party of Korea Central Committeeand president of the DPRK and the principal members of his entourage atYangyuan Court, surrounded by green trees and a murmuring stream. Duringthe feast, after Chairman Deng proposed a toast to President Kim's goodhealth and long life and everlasting Sino-Korean friendship, the twoleaders quaffed their fragrant Maotai wine in one gulp. Before thefeast, they held cordial talks to brief each other on their domesticsituations and to exchange views on international issues of common concern.

President Kim Il-song arrived in Beijing on 21 May on an official visitto China. During the visit, Chinese leaders Comrades Zhao Ziyang andLi Xiannian held cordial and friendly talks and meetings with PresidentKim Il-song. Deng Yingchao, chairman of the CPPCC National Committee,also called on President Kim Il-song at the Tiaoyutai state guesthouse.

China and Korea are neighboring countries as closely related as lips andteeth. The two parties and peoples of China and Korea, whether in thepast struggles against imperialist aggression and for safeguarding nationalindependence or in the current cause of socialist construction and forpeaceful reunification of their countries, have always supported andhelped each other, thus forging a profound friendship. At a meeting withPresident Kim Il-song, President Li Xiannian highly appraised the profoundfriendship cemented with blood between the Chinese and Korean peoples.He said: "We shed our blood in a trench, aid it was hard to distinguishthe blood shed by Chinese comrades from that by Korean comrades. Thefriendship between us is unbreakable." When calling on President Kim Il-song,Deng Yingchao said: "We are old friends. The Chinese and Koreans havefought together for dozens of years. Our friendship is sealed in blood."President Kim Il-song said: "In the difficult years, the Chinese peopleshed a lot of blood for us. Since the liberation of Korea, China has alsoextended much assistance to us. The Korean people will never forget this."When talking about bilateral relations, leaders of the two countriesunanimously agreed that continuously consolidating and strengthening the

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long-tested friendship between China and Korea is the common aspirationof the two parties, governments, and peoples. Both sides hoped that thisfraternal friendship would be passed on to future generations.

During the talks with acting General Secretary Zhao Ziyang, President KimIl-song briefed him on the situation of Korea's socialist construction,emphasizing the objective and progress of Korea's Third 7-Year Planfor national economic development which started this year. Zhao Ziyangsaid: "We are pleased by the tremendous successes achieved by the fraternalKorean people under the leadership of President Kim Il-song and theWorkers Party of Korea and believe that the Korean people will certainlyrealize their magnificent goals by understanding their actual conditionsand continuing to display their revolutionary spirit toward hard work."Comrade Zhao Ziyang gave a detailed account of our country's currentpolitical and economic situation and its tentative plan for politicalstructural reform. The two leaders briefed each other on the two countries'relations with other countries, exchanged views in a thorough way oninternational issues of interest to both sides and reached a consensus ona wide range of issues. Comrade Zhao Ziyang was pleased to see the newdevelopment of the DPRK's external relations in recent years and that theKorean comrades have become more active in international affairs.

Talking about the situation of the Korean Peninsula, in his speech atthe welcoming banquet in honor of President Kim Il-song, President LiXiannian pointed out: "To ease the tension and secure stability on theKorean Peninsula and to achieve independent peaceful reunification oftheir fatherland, the Workers Party of Korea and Korean Government havemade unremitting efforts and put forth many important ideas and proposals.In particular, Comrade Kim Il-song's proposition for peaceful reunificationof the northern and southern parts of Korea in the form of a confederationis very fair and reasonable. It points out a correct direction and feasible wayfor resolving the Korean problem. At the end of December of last year,Comrade Kim Il-song offered a new proposal for holding high-level politicaland military talks between North and South Korea. This shows once againthe sincere desire of the Korean party and government to relax the tensionon the peninsula and to achieve peaceful reunification of the fatherland. Wefirmly support these reasonable proposals put forth by our Korean comrades."At a meeting with President Kim Il-song, Zhao Ziyang also reiterated thatChina will steadfastly and firmly support the Korean comrades in theirefforts to ease the tension on the Korean Peninsula and to realize peacefulreunification of their fatherland. At the meeting, President Kim Il-songinvited Comrade Zhao Ziyang to visit Korea, which he accepted with pleasure.

During his visit, President Kim Il-song was given a warm welcome by theChinese people and was immersed in a sea of friendship. The Chinesepeople gave grand and warm receptions to President Kim Il-song: A grandwelcome at the Beijing railway station, a warm welcoming ceremony in frontof the Great Hall of the People, and a grand state banquet at the Great Hallof the People. The scenes in which when meeting President Kim Il-song,

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Chairman Deng Xiaoping twice gave him a warm hug and said a few cordialparting words, and President Kim Il-song led Deng Yingchao to the gateby holding her hands to see her off when she called on him, left anunforgettable impression on the people. During the visit, acting GeneralSecretary Zhao Ziyang accompanied President Kim Il-song to visit thenew Tianjin port.

With his current visit to China, President Kim Il-song once again broughtthe Chinese people the profound friendship of the Korean people and madeimportant contributions in furthering the fraternal friendship and unityof the two parties, governments, and peoples of China and Korea.

/12858CSO: 4005/744

9

POLITICAL

PROMOTION OF YOUNGER LEADERS, OFFICIALS CONTINUES


[Text] Beijing, 8 Jun (XINHUA)--China's goal of modernizing its industry,agriculture, science, technology, and national defense will require moreyounger, competent leaders and officials. The latest issue of OUTLOOK

weekly discusses this issue in detail and explains how the choices shouldbe made.

According to the article, "Selecting, educating and promoting moreyounger, competent individuals to leading posts has been a well-thought-

out, long-term policy of the Chinese Communist Party Central Committee,and this policy will continue."

"Building up the country's reserve of qualified leaders and officials doesnot mean selecting and educating only a few people for key positions,"

the article said, "but the task is to choose and prepare thousands ofyoung people for leading positions at all levels."

Statistics show, over the past few years, China has selected and traineda large number of leaders, including 1,000 for provincial-level positions,

20,000 for prefectural leadership and 140,000 as county-level officials.

"These newly-trained leaders and officials will ensure a smooth transition

of power from the older generation to the younger at all levels," thearticle explained, "and this young, competent contingent will guarantee

the success of the country's modernization program, and China's currentpolicies.

"Potential leaders and officials should be young, professionally competent,ideologically sound and in good physical health, and their previous work

experience will be taken into consideration," the article stressed,adding, for example, those who hope to be promoted to provincial-levelpositions should be between the ages of 40 and 45.

"Our principle is to encourage more young skilled people to apply for thejobs," the article said, "and to achieve this, selection and examinationprocedures should be strictly controlled.

"To build up the ranks of the country's leaders and officials," the articlesaid, "more younger and competent people are needed at all levels."

/9604

CSO: 4000/099

10

NATIONAL AFFAIRS, POLICY ECONOMIC

LIN ZONGTANG EXAMINES LATERAL ECONOMIC TIES

Beijing JINGJI RIBAO in Chinese 5 Jan 87 p 2

[Article by Lin Zongtang [2651 1350 2768], Vice Minister of the State EconomicCommission: "Promote Associations While Maintaining Enterprises' Right toSelf-Management"]

[Text] In 1986, lateral economic ties in China became even more widespread,diversified in form, broader in scope, and had more of an impact on theeconomy than ever before. This was primarily seen in 10 areas: Leaders atevery level made lateral economic ties as a priority in reform. Lateraleconomic ties developed quickly and are playing an ever growing role in thenational economy. A host of economic associations of all kinds have appeared.Regional associations have developed and became further established as aneconomic entity. Technical cooperation has become a major feature of lateraleconomic associations. Lateral funds circulation has developed. Theintegration of military and civilian enterprises as well as the first andthird lines of production have gone through major developments. There havebeen new achievements in assistance directed toward old revolutionary bases,minority regions, border areas, and poverty-stricken regions. Lateraleconomic ties have promoted balanced development of the urban and rural,economies. The transformation of governmental economic management organs andfunctions has been accelerated.

In 1987, we should still stress lateral economic ties as an important part ofour efforts to stimulate the economy. The overall requirements for thisyear's work are as follows. As an organic constituent of the nationaleconomy, lateral economic associations should apply themselves to the centraltasks set by the central authorities, continue to thoroughly implement theState Council "Regulations" promoting associations, do a great deal tostimulate enterprises, strive to improve economic results, alleviate deficitsby increasing exports and therefore, foreign exchange earnings and byproviding aid to agriculture. There are three principal elements in this task.1) This year's work plan calls for "consolidation and development," along with"stimulation of enterprises"; we should strengthen the foundation that we havelaid with our present achievements, expand into new areas, and make growthmore intensive and broader. Lateral economic associations should serve theimportant task of stimulating enterprises and improving economic returns. 2)Understanding of lateral economic ties should still be gradually improved; we

should understand what is involved as new forms of lateral ties develop. 3)The formation of lateral economic ties should be closely centered on and servethe economic goals called for by the CPC Central Committee.

To further promote the development of lateral economic ties, departments

involved should strive to accomplish the following:

I. Further Improve Ideological Understanding

Some comrades fear that allowing enterprises to link up will lead to loss ofcontrol over the enterprises, loss of personal power and priviledges, and thatthey will be in charge of departments in name only. Such thinking hinders thedevelopment of lateral cooperation among enterprises. Conflicts arising inthe change from the old system to the new have also created problems forlateral associations. We should fully recognize that the expansion of lateraleconomic ties is an inevitable tendency in China's economic development. The"large and complete" or "small and complete" isolated economic fort willinevitably collapse, regional isolation will inevitably be broken, and themanagement system of vertical separation will inevitably be replaced by thenew management system. With commodity economic competition becomingincreasingly fierce, only lateral cooperation will enable enterprises tostrengthen their competitive ability and enable them to actively compete. Atpresent, lateral ties have basically begun to form, but they still do not gofar enough; now we should make them more far-reaching.

II. Continue To Maintain Enterprises' Right to Self-Management and SupportLateral Economic Associations Among Enterprises

We should promote associations on the basis of maintaining enterprises' rightto self-management; we must never weaken the enterprises' right to self-management. Premier Zhao has sternly stated: responsible departments which donot allow their subordinate enterprisees to form lateral associations areencroaching upon the enterprises' right to self-management. In the "30Regulations," the State Council specifically regulates this. We mustconscientiously and thoroughly implement these regulations. Strengthening thevitality of enterprises is the central link in reform of the economic system.Responsible economic departments at every level must truly let go of theirpower, allowing enterprises to become independent, self-managing economicentities. Only when enterprises have power can they become active and strong;only then can there be a vast future for lateral economic associations. Atthe same time we should help enterprises solve the actual problems which occurin lateral economic ties, problems such as distribution of profits, short-termloans, technology transfer, absorption of imported technology, etc. We shouldvigorously promote the lateral association of enterprises.

III. Correctly Handle Profit Distribution Relationships Among LateralAssociations

The fairness of profit distributions is crucial to whether lateralassociations can exist, grow, and be consolidated. In the past few years,some associated enterprises have gotten off to a fast start and havecontinually grown. But some enterprises are having trouble getting going, and

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whatever associations they form fall apart. In studying the causes, there arenone in which economic interests do not play a role. Solving this problemrequires both behaving in accord with economic laws as well as promoting thespirit of communist cooperation. Large and medium enterprises shouldespecially show the right spirit, standing a bit more upright and looking moreto the future. They should neither take advantage of others nor strive forprofit, but merely seek mutual growth and prosperity. We should provideguidance to associations in correctly handling the relationship betweenimmediate and long-term interests, the interests of the enterprise and thenational interest, and receiving and granting profits. We should alsocontinually adjust the profit- distribution relationships. At the same time,we should strengthen respect for the legal system and maintain all legalrights and interests of associations.

IV. Strengthen Leadership, Match the Needs of National Macroeconomic Growth

The development of lateral economic associations must try to combinemicroeconomic results with the social and macroeconomic results. The stateshould formulate industrial policy and plans for different industries andregions, as well as use economic levers and economic legislation, in order tolead enterprises into bringing their own interests in line with themacroeconomic needs. At present we should stress developing the energy andtransportation industries and industries providing scarce raw materials, andstress the expanded production of export goods and those in great demand onthe market; we should promote the association of processing industries withenterprises producing the raw materials, military industrial enterprises withcivilian industrial enterprises, and the linking up of agricultural,industrial, commercial, and foreign trade enterprises. With such associationswe should especially stress product quality, reducing consumption, productmarketability, increased exports, and improved economic results. Feasibilitystudies should be conducted for large and medium associations, to avoid blindgrowth and duplicated projects.

V. Conscientiously and Thoroughly Implement the Relevant State CouncilRegulations on Strengthening Lateral Economic Associations

Any management methods, rules, and systems which harm enterprise associationsshould promptly be studied and reformed. Anything which benefits enterpriseassociations should promptly be collected and promoted. This will allowlateral economic associations to continue to become more far-reaching.Departments dealing in a number of areas should work together, carrying outreforms that will enable them to coordinate tax revenue, government finances,planning, supplies, statistics, etc. This will create good externalcircumstances for lateral economic associations. VI. Further Improve theIntegration of Foreign Imports and Domestic Cooperation "Foreign imports anddomestic cooperation" is a policy important for the thorough implementation ofthe plan for opening up to the outside and stimulating the domestic economy;it is also an important element in the development of lateral associations.Foreign imports and domestic cooperation spur each other on and complementeach other. Importing from abroad will bring in advanced technology fromoverseas and domestic cooperation will spread the advanced technology to otherenterprises, thereby rapidly raising the technical level of all of society and

13

bringing out even greater economic results. Domestic cooperation will also

provide even more export goods, earning more foreign exchange for the state.In recent years, "foreign import and domestic cooperation" enterprises inFujian have brought in $147 million from overseas Chinese and foreign sources.Among the enterprises are 89 industrial associations. These enterprises haveadvanced technology, quite new equipment, quick access to international marketinformation, and are relatively competitive. The Putian County RubberFactory, for example, was originally a small collective factory on the vergeof closing down. Together with the Great China Rubber Factory of Tianjin, theEngineering Plastics Factory of the Fujian-Hitachi Co, and two companies fromMalaysia and Hong Kong, it set up the Fuxiang Plastics and Rubber Co, Ltd.

They cooperate in producing more than 300 kinds of rubber shoes and high-quality sports shoes. The products are selling well in 19 provinces andmunicipalities, and have also entered the international market in the United

States, Canada, the FRG, Denmark, and Southeast Asia. The daily output of

shoes has risen from the previous 400 pairs to 20,000 pairs. The total

investment was recovered in just 1 year, and $600,000 in foreign exchange wasearned for the state.

As reforms of the economic system become more far-reaching and as each

department and locality gradually and thoroughly implements the series ofreform measures put out by the State Council, the continuous and stable

development of lateral economic ties will be further promoted. We can say

with assurance that the momentous forward surge of lateral economicassociations is an inevitable trend in China's economic development. It willcertainly accelerate the pace of developing the four socialist modernizations.

12919CSO:4006/328

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ECONOMISTS OFFER DIFFERENT VIEWS ON 1986 PERFORMANCE

Beijing JINGJIXUE ZHOUBAO in Chinese 19 Apr 87 p 4

[Article by Xiao Qing [2556 7230]: "Economists Offer Different Views on theEconomy"]

[Text] Li Jiange [2621 0494 7041], Chang Qing [1603 3237], Zhang Xuejun,[1728 1331 6511] and other comrades expressed their views on the economy atthe third joint seminar on development and reform organized by the BeijingSociety of Young Economists recently.

Comrade Zhang Xuejun of the Economics Institute of the Chinese Academy ofSocial Sciences believes that economic development in China in 1986 exhibiteda new feature: the coexistence of credit expansion and insufficient investmentdemand. In that year, the ratio between the increase in bank lending and theincrease in the gross value of industrial and agricultural output was 2.08:1,a sharp rise from 1.03:1 in 1985 and 1.52:1 in 1984. Many comrades thereforeconcluded that total demand has continued to soar. But there was no explosionin total demand in 1986. Instead, investment demand dropped markedly, asdemonstrated by the considerable slowdown in investment and consumption, largeinventories of manufactured products, and the corresponding excess of socialsavings. In his opinion, what accounts for the different conclusions is thata series of conceptual indicators have been misapplied. Total supply shouldmean society's existing production capacity, not the sum of goods alreadyproduced. Investment appetite is not the same as investment demand, andincome is not the same as consumption. If we clarify our concepts, we willsee that total demand in 1986, particularly the relative slack in investment,was nothing more than the delayed response to the tight-credit policy in forcesince 1985. At a time when the economic system is still unsound, squeezingtotal demand or trying to effect a balance in the system of material goods mayupset the currency system. The more total demand is tightened, the moresevere the disequilibrium in the currency system will be, with ever moreserious consequences. The crux of the problem is rising wages and costs, andthe breakdown in fund circulation. Superficially, there seemed to be an over-expansion of credit. In fact, we had a dire shortage of funds, not enough tosatisfy the need in every social quarter. Accordingly efforts must be speededup to overhaul the enterprise, investment, and financial systems. Right nowwe must first adjust the loan structure and lower the percentage ofcirculating-fund loans properly and raise the share of loans for investment

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purposes correspondingly. New financing forms should also be introduced.Second, some of the cash earnings of enterprise employees may be directlyconverted into investments in the enterprises as "internal stocks."

Comrade Li Jiange of the Dynamics Office of the Development Research Center inthe State Council suggests that tne goal of macroeonomic control in 1986,namely, basically eliminating the various dislocations and unstable elementscaused by an overheated economy, has created a fairly relaxed environment formajor coordinated reform, but even greater efforts are needed. The excess oftotal demand over total supply has largely remained unchanged. Since thesecond quarter of 1986, with the money supply easing, total demand and totalsupply, which until then had shown signs of gradually falling into step withone another, began to draw apart even further. Budgetary deficits appearedand the international earnings situation worsened. One cannot be optimisticabout the future of credit. He argues that macroeconomic control must beimproved and the output growth rate must moderate appropriately because thestrong sectors have expanded to an extent unsustainable by the weak sectors.We must continue to rein in total demand firmly and cannot afford to set newlevels. The tendency toward holding down output value and pursuing fastgrowth must be checked. A critical moment has arrived in development andreform. Given the fact that we are hard pressed for funds, materials, andforeign exchange, and that the profit margin has been squeezed hard, majorproblems will arise if we continue to sacrifice profits and if everybody jumpson the bandwagon of ownership system reform at the same time. Thus we mustcreate a relaxed economic environment, work out a clear overall reformstrategy comprising a series of stages each with its goals, painstakingly puttogether a comprehensive coordinated reform scheme, and launch it withoutdelay.

Comrade Chang Qing of the Price Office of the Development Research Center inthe State Council said that conflicts between the dual systems and their ownnumerous shortcomings have led to a "syndrome" in the national economy. As hesees it, the economic situation must be analyzed from a broader historicalperspective. A survey of the development of a commodity economy in manynations shows that such development in general can be divided into threestages: the stage of shortage, transition from a sellers' market to a buyers'market, and the stage when a developed buyers' market takes shape. After theper capita Gross National Product reaches a certain level, national economicgrowth will enter a stage characterized by regular and spontaneous changes inthe economic structure. In 1986, prices soared and could not be brought down.Manufactured products accounted for a sharply rising share of funds.Inventories built up too rapidly and savings increased too fast. All of thatpoints up the structural irrationality in China's economy. In fact, theeconomy is in a structurally rigid state. Whether we should ease or tightendemand is not to be determined by subjective wishes, but has more deep-seatedeconomic reasons, namely that structural economic irrationality has forced thenational economy to operate abnormally. At a deeper level, structuraleconomic irrationality and rigidity are due to the existence of the dualsystem. Under the old system, elements of production could not circulateproperly, there was a stampede to invest, the structure was rigid, and thegovernment was forced to undertake an administrative adjustment once every fewyears. The new system has not been firmly established. The market has some

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regulatory effects on increasing the money supply only. The frictions betweenthe two systems have led to new problems such as consumption fever. It is notenough, therefore, merely to tighten or relax total demand, which haspractical significance only when the structure has been rationalized, whenelements of production can react sensitively to price signals, and whencirculation is good.

Comrade Chang Qing emphasizes that it is hopeless to turn back. Tae only wayout is coordinated reform. We should continue to forge ahead on three mainreform fronts: draw up an industrial policy as soon as possible as the basisfor macroeconomic control and as a substitute for the balancing function ofthe old planning system; reform the price, financial, tax, and circulationsystems, create an environment where enterprises can compete fairly, andperfect the market system to accelerate the circulation of elements ofproduction; and reform the enterprise system by introducing contracting,leasing, fund management responsibility system, and other changes. At presentwe should merge or restructure some enterprises to solve a number of urgentproblems in the system and region, on the one hand, and broaden the practiceof enterprise leasing enterprise and eliminate the rigidity of the economicstructure, on the other. That way progress may be made in 1987. Oncecoordinated reform gets under way, the national economy will keep runningnormally on its own.

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17


BEIJING EXPERTS DISCUSS PRICE REFORM

Shanghai SHIJIE JINGJI DAOBAO in Chinese 2 Mar 87 p 13

[Unattributed article: "Beijing Experts Review Price System Reform; Xue Muqiao[5641 2550 2890], Xu Yi [6079 3015], Ma Bin [7456 6333], and Zhang Zhuoyuan[1728 0587 0337] Attend Seminar and Make Statements"]

[Text] Recently in Beijing, the Chinese Price Research Association and the

editors of JIAGE LILUN YU SHIJIAN [PRICE THEORY AND PRACTICE] jointly held aseminar on price reform. The seminar reviewed and evaluated the price reformsof the past few years. The famous economists Xue Muqiao, Xu Yi, Ma Bin, andZhang Zhuoyuan also spoke at the meeting.

Some of the experts at the seminar believe that the price reforms of the pastfew years have basically been successful. Their reasons are that in theseyears the grain harvests have increased, nonstaple food supplies have grown,and the people's lives have been greatly improved. Although the price indexhas gone up considerably in the course of price reform, it has not exceeded 10percent. When Yugoslavia was reforming prices, the price index went up 70

percent; we have basically kept prices under control in our reform.

Some other comrades believe that the price reforms conducted so far can bedivided into two stages. The first stage was from 1979 till 1983, and thesecond from 1984 till 1986. The first stage of reform was successful,perfecting price relationships and playing a very positive role in raising theprice of eight agricultural products and byproducts. This stage spurred thegrowth of production, adjusted the prices of cloth made from cotton andsynthetic fibers, and lessened discrepancies between supply and demand. Thisstage was primarily a restructuring: the overall price level did not go upsignificantly, the price of cotton and synthetic fiber cloth both rose andfell, the price of watches and radios was adjusted downward, and the livingstandard of urban and rural people went up. The shortcomings were that theprice increases for agricultural products were somewhat large, making thestate's financial burden heavier. The price rises for the eight agriculturalproducts and byproducts were closely followed by even greater increases in theprices of several cash crops, and the grain price again reached the verybottom. Before the price of cotton cloth was adjusted, there was aconcentrated emphasis on sales, so that for a period of time after the priceadjustment, sales of cotton cloth were affected.

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There were fewer successes and more failures in the second stage of reform.The unsuccessful areas were: Price relationships were not perfected; in somedepartments, for example, the profit to investment ratio is becoming lower andlower, so that it is already much lower than the loan interest rate; even ifall the profit is used to repay interest, it still is not enough. The "two-track system" for production material prices and the "inverse 30-70 percent"and "inverse 40-60 percent" relationship in the inverse proportioned pricesfor agricultural products and byproducts has brought chaos to state finances,credit, and accounting. Speculation is no longer an isolated incident, andaccounts are a mess. Most people do not think that all of the blame for theseproblems should be laid on price reform. Because in recent years the nationaleconomy has exceeded its budget, inflation has become a major factor in theprice rises. In addition, we also should not underestimate the effects offoreign trade and exchange rates. For example, the sharp rise in price of somecash crops was related to the high prices paid by foreign trade departments.Another example is the 20 percent rise in the exchange rate, which increasedthe costs and reduced the profits of many enterprises; some profitmakingenterprises went into the red and had no choice but to raise their products'prices. We should not fail to take these causes into consideration.

12919CSO: 4 006/474

19


STATE GUIDANCE PRICING DISCUSSED

Nanchang JIAGE YUEKAN [PRICING MONTHLY] in Chinese No 12, 15 Dec 86 pp 12-14

[Article by Lin Bifang [2651 4310 5364] of the Department of Trade, ChinesePeople's University, Beijing: "Brief Discussion of State Guidance Pricing']

[Text] State guidance pricing is a new form of pricing which has appearedduring price system reforms of the past few years. State guidance pricing isdirected toward those enterprises possessing the right to set and adjust theprice of commodities. The state achieves macroeconomic control of the marketprice by stipulating both the principles for setting prices and the pricelevels, thus bringing price trends in line with the law of value, the law ofsupply and demand, and the needs of state policy. Relatively accurate priceinformation is given to producers, consumers, and intermediaries.Responsibility for setting the actual price of commodities is shared amonglocal governments, local responsible departments, and enterprises; setting theprice should be done with flexibility, based on output and sales and withinthe range of state regulations.

State guidance pricing currently takes a variety of forms, depending on thespecial characteristics of each commodity and differences in output, supply,and marketing. These measures include stipulating for a fixed period theguidance price level, the floating price, the price range, and the maximum andminimum price; and stipulating the margin percentage between buying andselling price and between the wholesale and retail price.

State guidance pricing is a method of pricing which is between state mandatedpricing and free pricing regulated by the market. It still falls into thecategory of planned pricing.

China's experience in price reform has proven that state guidance pricingmeets the need for price strengthening through macroeconomic guidancefollowing microeconomic stimulation. It is characterized by its quick andtimely reflection of commodity value and market changes in supply and demand.Furthermore, movement in prices is kept within the planned range for priceadjustments. State guidance pricing offers many advantages, which are mainlyseen in the following areas.

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1. By using state guidance pricing, the state can exercise macroeconomiccontrol of market price levels. This helps maintain the relative stability ofmarket prices. When demand outstrips supply of certain commodities and theprice is deregulated, senseless price rises easily result if we rely entirelyon regulation by the market. When the supply of commodities exceeds demand,it is also easy for large declines in the commodity price to occur. In orderto avoid the blindness of market regulation, we must strengthen stateguidance. Practicing state guidance pricing is one effective way to manageprices. Although the floating price, minimum price, and the stipulatedperiods for price levels and pricing principles affect only some commodities,a certain comparative price relationship exists in fact among all commodities.

After the price of one commodity goes up, it sets off a wide-ranging chainreaction, and it is closely followed by the rise in prices of relatedcommodities. If the state can act in time to hold down the price of the firstcommodity, the prices of the related commodities will be relatively table.Action by the state in guiding prices can serve to stabilize market prices.

2. State guidance pricing helps to restructure the economy in accord with theneeds of society and makes rational use of resources. This feature isespecially important for agricultural and forestry products. Because theresources for some commodites are limited and the production cycle is long,the slightest loss of control can lead to long-term imbalances between marketsupply and demand. Practicing state guidance pricing can prevent majorfluctuations in prices and helps to guide production.

3. State guidance pricing helps protect the interests of producers andconsumers. If there is nothing but free pricing on some importantcommodities, prices will rise when demand exceeds supply. Although theintermediaries and producers benefit, consumer interests are harmed. With alimit to the peoples' purchasing power, there will also be limits to thecirculation of commodities. When the opposite happens, and prices fallbecause supply exceeds demand, the intermediaries are hurt and producerenthusiasm is dampened. Although consumers benefit temporarily, if productiondoes not grow, market demand will ultimately exceed supply, and this does nothelp the consumer. State guidance pricing prevents large price fluctuations,and consumers will not suffer economic loss caused by price changes. At thesame time, state guidance pricing provides a steady income to producers, thushelping to increase their enthusiasm. Producers can vigorously expandcommodity production with a sense of security.

4. State guidance pricing helps to limit speculative activity. Large changesin prices provide speculators with a ripe opportunity. State guidance pricinglimits large price increases and declines, reduces the number ofopportunities, and thus limits speculation. At the same time, state guidancepricing of commodities in short supply still allows a fair profit forcommodity intermediaries. The only thing it limits is exorbitant profits.

5. State guidance pricing helps to vitalize enterprises. Although stateguidance pricing stipulates a certain range, limit, and level of prices, it isstill more flexible and random when compared with mandatory state prices.Within the limits fixed by the state, an enterprise can arrange its ownbusiness activities according to the growth of production and market supply

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and demand. In response to market conditions, it can quickly adjust theactual prices of the goods it produces, and thus increase its ability to adaptand compete.

6. State guidance pricing helps reform the pricing system. For a long time,authority to manage prices has been excessively centralized because the stateset prices over too broad a range of commodities. Prices usually could notpromptly reflect changes in commodity value and market supply and demand. Inaddition, one-sided interpretation of the policy of stable prices made itdifficult to adjust or change prices. This created disorder in the pricingsystem. But now, state guidance pricing can swiftly reflect market commodityoutput, supply, and sales by stipulating the range of price movement. It canprovide information for the reform of the pricing system, help to adjustunreasonable commodity prices, and gradually change serious price distortions.This will tend to make the pricing system more fair.

We see from the above advantages that state guidance pricing is a method ofmanaging prices which offers vitality and the potential for future growth. Atpresent we should actively create the proper conditions for the furtherperfection of state guidance pricing.

First, value should be the basis for the study and determination of pricelevels, median prices, range of price changes, and other issues concerningstate guided prices. Consideration should also be given to the effect onvalue of market supply and demand, state policy, the amount of money incirculation, and the international market. This will basically bring price inline with value. Thus, in determining the state guidance price, concerneddepartments should conduct further studies to analyze output, supply, andsales. For some commodities, the international market should also beanalyzed. The state guidance price level can thus make sure that producersand intermediaries are compensated for their labor and expenses and receive areasonable profit. Only in this way can state guidance pricing truly play aguiding role.

Second, state guidance prices should be set appropriately, so that theybenefit all parties. If the minimum commodity price is set too high, consumerinterests are harmed and the commodity will not reach its true value, leadingto overstocking. But neither can the price be fixed too low: if so, there isno profit for the producer and intermediary. Nobody will produce or deal inthis commodity; economic growth will suffer and the people's needs will not bemet. The state guidance price should therefore be a reasonable price thatwill be able to respond to actual changes. It should be acceptable toproducers, intermediaries, and consumers. It should also be able to guideproduction and business.

Furthermore, the state guidance price is not fixed in stone. In practice,different methods of guidance and different prices should be chosen, based ondifferent products, different periods of time, and different conditions. Theplanned guidance of price for some products can be achieved by setting a baseprice and a range of fluctuation; with other commodities, the price level canbe fixed for a certain period. In this way, as long as the intermediateenterprise maintains the state guidance price level, it can set purchase and

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selling prices on its own, based on changes in market supply and demand. Pricerises and declines are allowed. This will promote growth in production andbetter satisfy the needs of consumers.

Finally, there is a certain compulsory element to state guidance pricing, forproducers and intermediaries must stick to the price levels and pricingprinciples stipulated by the state. However, a more important part of stateguidance pricing is that it uses economic means to regulate market prices.The experience of many areas with guidance pricing has proven that the resultsare quite good when economic means are used to guide prices. For example,some areas have organized trade fairs and opened up distribution channels forpurchases and sales. Guidance pricing has done quite well at enablingproduction and business to achieve normal development. But other areas havetaken the opposite course and used nothing but compulsory administrative meansto guide prices. This easily leads people to confuse state guidance pricingwith state mandatory pricing. As a result guidance pricing could not achievethe intended effect. We must overcome this confusion.

State guidance pricing is a method of price management which is currentlybeing developed and perfected. Like reform of China's price management system,there are certain prerequisites for its implementation. These includeadjustment of the price system, perfection of the socialist market system,truly conferring on enterprises the status of relatively independent producersand businesses, maintenance of a relative balance between the market commoditysupply and demand, etc. Only in this way can state guidance pricing makegreater use of its characteristic strengths: the integration of planning andflexibility.

12919cso:4006/ 4 7 4

23

SMALL-SCALE ENTERPRISES ECONOMIC

TOWNSHIP ENTERPRISE CONTRACT RESPONSIBILITY SYSTEM VIEWED

Beijing NONGYE JINGJI WENTI [PROBLEMS OF AGRICULTURAL ECONOMY] in Chinese No129 23 Dec 86 pp 25-27

[Article by Pu Changxing [3184 7022 5281] of the Department of AgriculturalEngineering, Jiangyin County, Zhejiang: "Several Problems of the TownshipEnterprise Contract Responsibility System in Urgent Need of Resolution"]

[Text] I. The Question of the Principle Party to the Contract

Township enterprise contracts currently take a large variety of forms, butthe great majority of them essentially treat the factory head (manager) or afew copartners as the contracter, that is, as the principle contracting party.The reasons for this are: 1) it enables the contractors to have bothresponsibility and power, which helps to stimulate their enthusiasm and bringout their abilities; 2) it gives contractors motivation which is good for therealization of targets.

Contracts of this kind give a few contractors a special position within theenterprise. In Wuxi City, there is a township which stipulates in contracts:"During the contract period, the contractor is fully responsible for theenterprise. He has the right to direct all economic activities of theenterprise and the right, within certain limits, to decide on raising orlowering the wages of employees, distributing earnings in excess of profits,and assigning personnel within the factory; this means that as regard to theentire factory, higher level economic organs, and the state, he is given fullpowers to deal with economic matters and bears total economicresponsibility." In this way, the contractor becomes the dominating force inthe enterprise. This has led to the three following problems.

1. The problem of the relationship between the majority of factory employeesand the few contractors. People cannot help but ask, who really is the masterof the enterprise? In this form of contract, the enterprise's master is theindividual contractor, while the many enterprise employees are the "hiredworkers" of the contractor. Is this kind of human relationship within anenterprise really in accord with the demands of socialist enterprises?

2. Can individual contractors bear complete economic responsibility for theenterprise? The property, output value, and profit of a township enterprise

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can be as little as in the tens of thousand yuan, or as much as millions ortens of million, even hundreds of million yuan. Can individual peasants takethe economic responsibility for such an enterprise? When used here, "bearingeconomic responsibility" is nothing but talk, for it seems that the keyelement in the contract is not responsibility but the power and economicbenefits given to the individual contractor. Is this practice essentially inaccord with what a contract should be?

3. The problem of handling economic profits within the enterprise. Wheresuch contracts are in effect, the results of the enterprise's business arelinked only to the contractor; the many employees can only "stand in awe ofthe mighty sea," as if they had done nothing. In order to stimulate theinitiative of contractors, some places have given a host of privileges andawards to secretaries and factory managers. In southern Jiangsu alone thereare probably 10 different awards: for example, the professional award, thespeed award, the doubling of production output award, the award for raisingthe standard of living above the average, the basic task award, the good startaward, awards for achieving different percentages of quotas, the militaryorder certificate, the increased profit award, and so on. In this way, thecontractors inside the enterprise enjoy an income vastly exceeding thecompensation that employees receive for their work. In certain places, thereare actually contractors whose annual income is more than 10,000 yuan, or eventens of thousand, up to over 100,000 yuan. This inevitably leads to someserious questions. Is it really possible that the business results of acontracting enterprise are due to the work of certain contractors? Is itreally true that the value created by the labor of certain contractors isworth so many times more than that of ordinary workers? The answer isnegative.

This form of contract quite clearly carries the seeds of its own destruction,and so it should not be adopted. We will have to delve into the question ofthe principle party to the the township enterprise contract, which is actuallythe question of just who should be the contractor. The only correct answer tothis question is that the contractor should be the entire work force of theenterprise. They are the main party to the contract; the factory head(manager), democratically elected by the employees, is the representative ofthe contractor, the main party to the contract. This makes it easier toovercome the three problems described above, and puts the enterprise contracton the correct path. Implementation of the contract system, in which theenterprise work force collectively is the contractor and is represented by thefactory head (manager), requires correct handling of the personnelrelationships within the enterprise, in particular the relationship betweenthe factory head (manager) and the employees.

The township enterprise contract system is a feasible and effective way ofenlarging the rights of an enterprise to self-management. The question is, towhom these enlarged rights of enterprise self-management should belong? Theanswer should be that the rights belong to the enterprise and not toindividuals. The work force is the main party to the contract in theenterprise, for the employees are the masters of the enterprise. Therefore,fundamentally speaking, these rights should belong to the entire work force ofthe contracting enterprise and not to individual leaders. "Enlarged rights"

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are a means to an end, not the end itself. In the contract system, theenlarged rights provide the contractor with the conditions needed to completecontract obligations. It is thus quite obvious that the enlarged rightsshould belong to the contractor, namely, the entire work force.

The enterprise work force is the principle party to the contract and themaster of the enterprise. In this case, where do the factory head and managerfit in? They should be "public servants," not rulers lording over theirworkers. The contracting enterprise should thus establish a sound system forworker representative councils; decisions on all major questions affecting theenterprise should go through the worker representative council. The factoryhead and manager should be democratically elected by the worker representativecouncil; they should work under the leadership of the council and accept itssupervision. In this regard we must strongly stress that this is democraticmanagement, not worker "participatory management" or "attracting workers toparticipate in management;" neither does it mean turning the workerrepresentative council into a "consultative body." The worker representativecouncil should be a body that actually exercises the powers given it.

II. The Question of Targets and Length of Appointment in the Factory HeadResponsibility System

At present contract targets for township enterprises are usually set annually.The contract representative--the factory head (manager)--is usually appointedor hired for a relatively short term, with the power to appoint or dismiss himin the hands of higher authorities. Because the contract responsibilitysystem only looks at short-term enterprise profits to judge business results,and uses these short-term profits as the basis for calculating compensationfor the contractor, the factory head and enterprise are compelled to seekprofits for that year. This forces the enterprise to only focus on immediate,short-term profits, and to ignore the long-term development of the enterprise.This "enterprise myopia" takes two forms. One form takes over the factory butdoes not keep it in good condition; only short-terms interest are consideredwhile long-term interests are ignored; machinery and equipment are notmaintained and well-used, machine use exceeds its capacity, equipment isthrown together, and production is predatory. These problems are quiteconspicuous, so most people are aware of them. Another form of "myopia,"caused by the short duration of the contracts, is the lack of economicincentives encouraging the enterprise to consider long-term investments. Theresult is that no one shows any interest in the strategic issues affecting theenterprise's long-term survival and growth: training and intellectualdevelopment of personnel, bringing out new products, technical development,renovation and replacement of equipment, opening long-term markets, etc. Withsuch a contract system, the attainment of superficial contract goals andawards to the contractor of large bonuses are signs that the enterprise facesa very precarious future. This problem is a hidden one and usually goesundetected, but it comes much closer to the heart of the matter.

Dealing with these defects requires the establishment of a factory headresponsibility system with fixed terms and goals. The time span of thisresponsibility system should tend to be long, from 3 to 5 years. Thissystem has two aspects. First, the factory head represents the enterprise

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employees in signing the contract with higher responsible departments. Theestablishment of a system in which the factory head answers to higherresponsible departments during the set period reveals the responsibility ofthe contractor toward the enterprise ownership system. Second, the factoryhead signs a contract with the worker representative assembly, establishingthe period of time for which the factory head is accountable to the enterpriseemployees. This reveals the responsibility of the contractor's representativetoward the contractor.

Under the system where the factory head is accountable to the higher

responsible departments for a fixed period of time, goals in the followingareas should be clearly stipulated for the period of appointment: technical

and economic growth of production in the enterprise, including profits, rateof increase in profits, total output value, output of principal products,quality, costs, earmarked funds, and turnover of funds; contributions totownship and village governments; technical transformation of the enterprise,such as replacing and renovating equipment, expanding the scale of production,and adopting new technology and new processes; development of new products bythe enterprise, such as the direction, quantity, and time-frame for productdevelopment; and work force size and labor productivity.

Under the system where the factory head is responsible to enterprise workersfor a fixed period of time, goals in the following areas should be clearlystipulated for the period of appointment: development of projects benefitingthe work force as a whole, such as worker safety and the building andmanagement of worker apartments, canteens, day-care centers, kindergartens,and entertainment centers; increases in worker income; expansion of enterprisereproduction and growth in reserve funds; worker technical training, includingthe quantity and quality of technicians and technical workers, theeducational and technical level of workers, investment in education, andbuilding of cultural and educational facilities; and improvement of workingconditions in the enterprise, reduction in intensity of the work, andbeautification of the environment.

The goals during the factory head's appointed term should be linked to themedium- and long-term plans of the enterprise. The factory head is elected bythe worker representative council and approved and appointed by higherresponsible departments. Before taking the position, he should sign separateformal contracts with the responsible department handling enterprises onbehalf of the township and village governments and with the workerrepresentative council, representing the enterprise's workers. The contractsshould outline his responsibilities and goals during the period ofappointment. On this basis, the certificate detailing responsibilities andletter of appointment should be issued. This shows the serious nature andthe legal effectiveness of the responsibility system, which sets the term andgoals for the factory head.

We must be sure to evaluate properly the factory head's progress toward thegoals during his term. After the factory head responsibility contract hasbeen signed, an evaluation team should be set up and a file on the factoryhead's term of office should be created, to include monthly inspections andannual assessments. At the end of the year, based on evaluation of the actual

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results, the evaluation team should announce their grading of the factoryhead's performance so that the workers may assess it. According to theprogress in reaching the goals, reasonable bonuses or fines should beassigned.

III. The Question of Enterprise Bankruptcy

At present, another rather pressing problem in the implementation of thetownship enterprise contract responsibility system is that some enterprisesare losing money, overstocking goods which ties up their money, all to thepoint that they are even unable to pay their workers. But they feel no qualmsabout pointing to various factors beyond their control and asking for specialtreatment. The responsible township departments have no choice but to comeup with some way to use the profit from other township enterprises to "raise"and "maintain" these enterprises. Such enterprises have become a burden onresponsible departments at every level, seriously affecting the economicresults and growth of all township enterprises. Is it better to "maintain"these enterprises, or should we let them "go broke." This is a real-lifeproblem.

If we choose to "maintain" them, this forces us to use a considerable portionof the limited funds and materials available for the development of townshipenterprises to maintain the existence of unprofitable enterprises. There is avery poor yield on the input of these funds and materials, and in some casesthere is no yield whatsoever; the inputs go into a "bottomless pit."Providing inputs to such enterprises does not help township enterprises as awhole achieve optimum results with the limited financial and materialresources available, but rather just ties them down and hinders growth.

In a commodity economy, the law of value dictates that competititors incommodity production will inevitably make or lose money, be winners or losers.By its very nature, competition means the superior wins and the inferior isweeded out; it protects progress and eliminates backwardness, and thus helpsthe growth of production in society. But "maintaining" enterprises, byprotecting backwardness, is the exact opposite of this. This practice runscounter to the commodity economy and the law of value.

For this reason, the bankruptcy law should be applied to enterprises whichhave run at a deficit for a long time. This will help to tightly bind thefate of the enterprise's entire work force with that of the enterprise. Theworkers will thus be concerned about the enterprise's stability and success,for they will have personal interests at stake. If the enterprise does notsucceed, they will have to bear the serious economic responsibilitiesresulting from the enterprise's losses and bankruptcy.

Of course, we do not intend enterprise bankruptcy to be an end in itself, butrather a means; the goal is to prevent bankruptcy, to reduce the incidence ofbankruptcy as much as possible. We should therefore help those enterprisesfacing bankruptcy to fight a short-term "last-ditch battle," doing all we canto enable them to shake off their difficulties as soon as possible, to moveaway from the edge of bankruptcy and resume the path of healthy growth.Nevertheless, there will always be some enterprises which will ultimately go

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bankrupt, and there is nothing wrong with this. On the contrary: first, itcan allow township enterprises to get rid of "excess baggage"; second, it canserve as an example to other township enterprises, spurring them to improvetheir competitive ability as soon as possible.

We should find those responsible when enterprises close down and go bankrupt.When leadership mistakes are the cause, economic and legal responsibilityshould be pinned on the leaders. When the cause is senseless orders andunwarranted interference from higher level leaders, those interfering shouldbear economic and administrative responsibility. After an enterprise hasclosed down and gone bankrupt, the status of debtors and creditors should bestraightened out and fixed assets should be inventoried. These fixed assetscan generally be sold off to repay debts. From the day the enterprise closeddown, that is, from the day the staff of the closed, bankrupt enterprises losttheir jobs, the workers may take other employment or engage in work on theirown. Where conditions permiti necessary welfare payments can be issued toenterprise employees before they take work elsewhere. These "conditions" are

an "enterprise bankruptcy welfare fund" containing a certain amount of money.Each month the enterprise would pay to the insurance company a certainpercentage of the payroll, which would go into the enterprise bankruptcywelfare fund. If the enterprise went bankrupt, the insurance company wouldmake welfare payments according to regulations.

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29

FOREIGN TRADE, INVESTMENT ECONOMIC

OFFICIAL SAYS TOURISM TO UW)ERGO MAJOR REFORM


[Text] Beijing, 9 Jun (XINHUA)--China will maintain its current charges for

tourism services next year by reforming management and raising work

efficiency, an official from China's National Tourism Administration said here

today.

The National Tourism Administration will put forward a list of reform measuresin October, Zhang Xinsheng, deputy director general of the administration,told a visiting group from the China Travel Organization Ltd. of Hong Kong.

The detailed measures are designed to promote competition, and cooperation aswell, between various tourism services. The National Tourism Administrationwill work out a standard to test all its staff members.

"All unqualified quides will be dismissed," Zhang told the guests.

In line with the norms set by the state, the present 936 tourist hotels in thecountry, with a total of 300,000 beds, will be divided into different classes,he said, adding that hotels can also form administrative groups amongthemselves.

On the developments for this year, the official said that the country willconcentrate its efforts on the construction of major tourist centers androutes, and promote the service for individual tourists. Also to get emphasiswill be tourism based on local characteristics, such as visiting villages andworking and eating togefher with local peasants.

The 22-member Hong Kong delegation, which arrived here yesteray, will alsodiscuss tourism nanagement systems and prices with relevant departments duringtheir 3-day stay in Beijing.

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LOANS FOR FOREIGN-FUNDED ENTERPRISES


[Text] Beijing (CEI)--Officials of the Bank of China have answered questionsas to how foreign-funded enterprises apply for loans from the Chinese bank.

1. What is required of foreign-funded enterprises in applying for a loan tothe Bank of China: The enterprises, whether they are Sino-foreign jointventures or co-management businesses or enterprises with sole foreigninvestment, are required to have operation licenses issued by the Chineseadministration of industry and commerce and have opened accounts with Chinesebanks; they must pay their registered capital on schedule and have it examinedaccording to law; their board of directors must make decisions on borrowingloans and produce relevant documents; enterprises must have the ability torepay the loans, and provide reliable guarantees for repaying both the ýapitaland interest; and their investment in fixed projects are subject to theapproval of Chinese planning departments.

2. The types of loans extended by the Bank of China to foreign-fundedenterprises: The first is a loan for fixed assets; the second is a loan forworking capital; the third is a cash mortgage loan; and the fourth is thereserve loan.

3. Loans will be extended in Chinese currency (RMB) and foreign currencies,including the U.S. dollar, pound sterling, Japanese yen, Hong Kong dollar, andFederal German mark, as well as other convertible currencies as agreed upon bythe Bank of China.

4. The term of the loans: The term of the loan for fixed asets usually doesnot exceed 7 years; and with the approval of the Bank of China, the term canbe extended for some special projects, but will expire 1 year ahead of anenterprise's operation term as set in its license. The term of the loan forworking capital does not exceed 12 months.

5. The calculation of interest: The interest rates on RMB loans are the sameas those set by the People's Bank of China on loans to state-run enterprises.The interest rates on foreign currency loahs are set by the Bank of China andmay also be set by the borrower and lender through consultations in line withrates on the international money market.

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6. The procedure for procurement of loans: Enterprises must submitapplications for loans, and provide, depending on the type of loans, relevantcertificates and data. When the Bank of China considers it necessary to haveguarantors, enterprises must provide the guarantors that are agreeable to thebank.

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STATE IMPROVES SUPPLIES FOR JOINT VENTURES


[Text] Beijing, 8 Jun (XINHUA)--China's materials departments at differentlevels are making every effort to facilitate the supply of raw materials forenterprises with foreign investment, the business weekly of "CHINA DAILY"reported today.

One of the major measures is to set up special supply companies for jointventures in cities and provinces where more enterprises with foreigninvestment are located.

Since the central authorities issued 22 provisions to encourage foreigninvestment in April last year, 15 such companies have been set up in Beijing,Shanghai, Guangdong, Tianjin, and other cities.

More such companies would be established as the investment flow to China rose,said the weekly by quoting Zhu Wenqi, a senior official of the State Bureau ofSupplies.

"The effort aims to solve problems that joint ventures with foreign investmentmeet in materials supply," he said, adding: "Such companies can act as theiragents to import materials and equipment at international prices, which jointventures cannot get on the domestic market."

The supply companies for foreign investment enterprises mainly get theirmaterials through three channels: state allocation at state-set price, localauthorities at reference price, and on the market at market price, usually themost expensive of the three.

"So the prices for materials depend on from what channel they come andenterprises with foreign investment enjoy the same treatment in pricing as ourstate-owned enterprises," said Gu Yide, general manager of the BeijingMaterial and Equipment Supply Co. for Foreign Investment Enterprises.

The State Bureau of Supplies now control 20 varieties of key materials such assteel, copper, coal, timber, cement, and lead by setting quotas for keyprojects and localities, Zhu said, adding that another 300 kinds of materialsare under the control of ministries under the State Council.

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He said the state is to gradually decentralize control to local authorities

and finally change the original system of planned allocation of materialsupplies to obtaining supplies from the market.

Now the percentage of coal controlled by the state has dropped from 59 percentof the total in 1980 to 42 percent last year, the percentage of timber from 80percent to 30 percent, while the total volume of these products was rising

rapidly.

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34


COMPANIES TO ENSURE SUPPLIES TO JOINT VENTURES

HK081136 Beijing CHINA DAILY (BUSINESS WEEKLY supplement) in English 8 Jun 87pI

[Article by staff reporter Wang Yanping]

[Text] Following the state's directions to encourage foreign investment,China's material departments at different levels are making every effort tofacilitate the supply of raw materials for enterprises with foreigninvestment.

One of the major measures is to set up special supply companies for jointventures in cities and provinces where more enterprises with foreigninvestment are located.

So far 15 such companies in Beijing, Shanghai, Guangdong, Tianjin, and othercities have been set up since last year when the central authorities issuedthe 22 points to encourage foreign investment.

Zhu Wenqi, a senior official with the State Bureau of Supplies told BUSINESSWEEKLY that more such companies would be established as the investment flow toChina rose.

"The effort aims to solve problems that joint ventures with foreign investmentmeet in material supply and provide another way for them to get in shortsupply," said Zhu. [sentence as published] "Such companies can act as theiragents to import materials and equipment at international prices, which jointventures cannot get on the domestic market."

According to Zhu the State Bureau of Supplies now control the varieties of keymaterials such as steel, copper, coal, timber, cement, and lead by settingquotas for key projects and localities. Another 300 kinds of materials areunder the control of different ministries under the State Council.

The state is to gradually decentralize control to local authorities andfinally change the original system of planned allocation of material suppliesto obtaining supplies from the market, according to the official.

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Zhu said the trend was already apparent in the proportion of materialscontrolled by the state. For example, the percentage of coal controlled bythe state has dropped from 59 percent of the total in 1980 to 42 percent lastyear, the percentage of timber from 80 percent to 30 percent, while the totalvolume of these products was rising rapidly.

The supply companies for foreign investment enterprises mainly get theirmaterials through three channels: State allocation at state-set price, localauthorities at reference price, and on the market at market price, usually themost expensive of the three. "So the prices for materials depend on from whatchannels they come and enterprises with foreign investment enjoy the sametreatment in pricing as our state-owned enterprises," said Gu Yide, generalmanager of the Beijing Material and Equipment Supply Co. for ForeignInvestment Enterprises, set up officially last month located in the XuanwuDistrict.

Since its opening many joint ventures in Beijing have showed interest,approaching the company to discuss potential business, said Gu Yide.

The first deal reached by the new company was to supply 20 tons of urgently-needed high quality plastic to a Beijing-based joint venture between aNetherlands company and Beijing Radio Factory.

The general manager said the company focused its business in three areas:supplying materials, providing consultancy services, and acting as purchaseagent.

The goods handled by Gu's company fall into two categories: one is domestic-made goods including cars, steel, copper, aluminum, lead, timber, mechanicaland electric equipment, chemicals and varieties of raw materials, parts andfittings, and the other includes goods imported from abroad.

Now the company is investigating the circumstances of Beijing-based jointventures in order to guarantee their material supplies. After theinvestigation the company will help joint ventures select suppliers, he said.

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36


FOREIGN MANAGERS DISCUSS JOINT VENTURES


[Text] Beijing (CEI)--A recent issue of the "ECONOMIC DAILY" carriedsuggestions from foreign managers of joint ventures in China as to how toimprove the management of these enterprises.

Their criticisms include lack of initiative on the part of local managers, toomany meetings, and too much red tape.

Although the cost of labor is low in China, productivity is not high. Theysuggested that some technical procedures should be streamlined and theworkforce educated in modern labor practices.

Enterprises which import technology must have personnel who can read technicaldocuments in foreign languages, and understand the operation of computers aswell as capitalist financial systems, they said.

They also urged that the supply of materials and electricity should be ensuredand transportation and communications improved.

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MORE FOREIGN TV PROGRAMS TO BE AIRED

HK080047 Beijing CHINA DAILY in English 8 Jun 87 p 5

[Article by staff reporter Wen Jia]

[Text] China plans to show more foreign films and television programmes andto export more Chinese-made films and programmes abroad.

This is part of a new drive to boost China's television industry and to makeuse of more advanced technology.

Ai Zhisheng, minister of radio, film, and television, told CHINA DAILY at theweekend that China will continue its open policy in developing the industryand will seek closer co-operation with overseas companies.

About 700 million Chinese can now watch television. There are more than 80million television sets on the mainland, compared with only 9 million in 1980.The number of television sets is increasing by 10 million a year.

In 1986, the country imported more than 100 television dramas from the UnitedStates, Japan, Australia, and from some European and Third World countries.More are expected this year, Ai said.

He added that China imported foreign films and television programmes accordingto their ideological and artistic merits. China is also making efforts tohelp foreigners understand the Chinese way of life, he said.

New regulations are also being drafted to control closed circuit television,television transmitters, and video tapes.

"We're opposed to anything that may harm the construction of our socialistcivilization," Ai said.

Investigation shows that among China's television audiences, young people andinllectuals hope to see more good foreign films while rural people preferChinese-made programmes.

In the coming months, Chinese and West German actors and actresses willperform Chinese and foreign works together in Beijing for the first time.

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This is the result of co-operation between China's Central Television Stationand a West German station.

Ai said the present Chinese television programmes need to be improved to meetthe audience's demand. Programme makers should learn from some of theirforeign colleagues, he added.

Investment in television undertaking in the past years has been rising at ahigher rate than the speed of the nation's economy. Ai predicted that thiswould continue.

However, television stations, whose number has increased from about 60 in theearly 1980's to more than 280 at present, are still short of funds and trainedpersonnel.

Development of the television industry in China mostly relies on thegovernment for its funds.

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39


TIANJIN APPROVED TO ATTRACT MORE FOREIGN FUNDS


[Text] Tianjin, 8 Jun (XINHUA)--China's State Council has given TianjinMunicipality the go-ahead to utilize 1 billion U.S. dollars in foreigninvestment by the end of this decade to promote the city's infrastructures andexport-oriented industries, according to a press conference here today.

The municipal government has been allowed to adopt more flexible means toraise foreign exchange and set up foreign-funded projects, said Zhang Zhaoruo,chairman of Tianjin's Commission of Foreign Economic Relations and Trade. Nowthe city can approve projects with a total investment of less than 200 millionyuan, he said.

Tianjin will raise foreign exchange in the forms of issuing bonds on worldmonetary markets, and borrowing from international banks and otherinternational financial departments with the help of the country's centralbank. The city will also carry out compensation trade and leasing business toraise funds for smaller projects, he said.

The city government has listed a series of key projects, expected to be ableto promote export-oriented industries in order to enhance the city's capacityto pay off debts.

The new projects will concentrate on the manufacturing and processing of lightindustrial goods, the official said.

They cover the production of garments, textiles, shoes, carpets, foodstuffs,stationery, sports facilities, cooking utensils, toys, ceramics, glassware,medical apparatus, paper, metals, welding rods, auto-parts, electroniccomponents, bicycles, watches, cameras, household electrical appliance,elevators, and computers.

Some investment will be used to promote basic industries, the raw materialsindustry in particular, to produce more goods to substitute for imports. Theyinclude copper smelting, rolling of steel sheets, steel wire, natural gas,high-grade dyestuffs, and the establishment of casting and dies makingcenters.

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The remaining investment will be used in the building of urban infrastructure,which includes the expansion of a power plant with an installed capacity of600,000 kW, the building of a coal gas factory with a daily capacity of 1million cubic meters, and drinking water and sewage treatment plants.

To facilitate the setting up of foreign-invested projects, the city hasalready established a foreign investment service center.

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SPECIAL ECONOMIC ZONES ECONOMIC

TIANJIN MAYOR ADDRESSES PRESS CONFERENCE ON OPENING


[Text] Tianjin, 8 Jun (XINHUA)--Adherence to the four cardinal principles andopposition to bourgeois liberalization will not affect the implementation ofChina's policy of opening to the outside world, Tianjin Mayor Li Ruihuan saidhere today.

At a press conference, Li said, "Only by adhering to the principles (thesocialist road, the people's democratic dictatorship, the leading role of theCommunist Party, and Marxism-Leninism and Mao Zedong Thought), shall we beable to provide stable investment conditions."

He continued, "Opening to other parts of the world is a general trend in theworld today and nobody can reverse it."

He admitted that in a period after the struggle against bourgeois liberalismwas launched earlier this year, some foreign firms were worried aboutinvesting in Tianjin, and some Tianjin officials in charge of businessdiscussions with them were also somewhat hesitant.

"But this did not last long. Now everything is carrying on as usual andwe're quickening the pace of opening to other parts of the world," he told theChinese and foreign reporters in his audience.

The number of contracts Tianjin signed with foreign firms in the first 5months of this year was up 102 percent from the same period in 1986. Since1979, the city has approved 199 Sino-foreign joint ventures and co-managementbusinesses, 100 of which are now operational.

Asked what method Tianjin is using to attract foreign funds, Li said that themunicipal authorities make sure that foreign investors make profits.

"To make Sino-foreign joint ventures successful, we do everything within ourpower to help foreign firms study their investment direction and solveproblems for them," he stated.

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He said that the municipal authorities plan to extend the term of Sino-foreignjoint hotel ventures to 18 years so that foreign partners will earn profits asa result of slower depreciation of fixed assets.

Tianjin will be empowered by the State Council to introduce 1 billion U.S.dollars in foreign funds during the 1986-90 period, he disclosed. It willalso receive from the state 1.4 billion U.S. dollars in hard currency and7 billion yuan (about 1.9 billion U.S. dollars) for technological upgradingprojects.

He adivsed foreign investors to start export-oriented enterprises in Tianjin.

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SPECIAL ECONOMIC ZONES ECONOMIC

NINGBO PORT CITY TO BOOST EXPORT-ORIENTED ECONOMY


[Text] Hangzhou, 5 Jun (XINHUA)--The port city of Ningbo, Zhejiang Province,plans to introduce more foreign funds and import more technology to boost its

export-oriented economy, according to Deputy Mayor Chen Zheliang.

The city has attracted 52.21 million U.S. dollars in foreign funds since itreceived greater authority over foreign investment and trade in 1984, Chen

told XINHUA.

Sixteen Sino-foreign joint ventures and cooperative businesses are operational

in Ningbo, Chen said, adding that the city has signed contracts to set up 33foreign-funded enterprises.

The deputy mayor also reviewed Ningbo's progress in developing the city'sinfrastructure. Ningbo has opened air routes to the Zhejiang Provincialcapital of Hangzhou and the metroplises of Beijing and Shanghai. The Yueshe

International Airport is also being built as well as a canal between Hangzhouand Ningbo.

Direct dialing telephone service is now available between Ningbo and Hong Kong

and cities in Britain, France, Italy, Japan, and the United States. Last yearthe city imported computer-controlled telephone switchboards with a total

capacity of 14,000 lines.

The Ningbo port, which consists of the old Ningbo, Zhenhai, and Beilun docks,has 40 berths, the largest of which is capable of accommodating vessels of100,000 dead weight tons. The port now handles 36.83 million tons of cargo ayear, ranking it seventh in China.

Ningbo's Xiaogang economic development zone, designed for foreign investors,

has built workshops and warehouses with a floor space of 48,000 square metersin the past 2 years. Four Sino-foreign joint ventures are operational thereand another four will go into operation later this year.

Meanwhile, the city has imported 150 pieces of technology to upgradefactories, which have added 240 million yuan in output value, and 32 millionyuan in profits and taxes a year.

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AGRICULTURE ECONOMIC

CHEN YAOBANG SAYS AUTUMN CROPS GROWING WELL


[Text] Beijing, 10 Jun (XINHUA)--Autumn crops, including grain, cotton, andcash crops, are growing well in most rural areas, despite abnormal weather inspring, according to a press conference here today.

Chen Yaobang, vice-minister of agriculture, animal husbandry, and fisheries,told the conference that the total grain cultivation area has been widened bya big margin compared with that of last year.

In south China the total area of hybrid rice fields has been expanded to 10million hectares this year--l.06 million hectares more than last year. Thehybrid maize fields have also been enlarged to 15.33 million hectares.

The multi-cropping areas in the eight southern provinces, including Sichuan,Hubei, and Hunan were more than 1.3 million hectares more than last year andthe acreage for popularizing high yield autumn grain in six provinces,including Jiangsu, Shandong, and Henan, has doubled that of last year. Manyprovinces have conducted comprehensive treatment of low-yield fields.

This year, China is striving to promote the total grain output to 405 milliontons--the level of 1984--and the cotton output to 4.25 million tons, theofficial said.

The attaining of this target largely depends on the production of autumngrain, the minister said.

He drew attention to the abnormal weather conditions in the country. Theremight be more floods this year in the major grain-producing areas on themiddle and lower reaches of the Yangtze River, the Yellow, Huaihe, and HaiheRiver basins in north China and in the Songhua-Liaohe River plain area innortheast China. The serious drought in northwest and southwest China mightcontinue. He called on all localities to do the field management well and bewell prepared against possible natural disasters, trying everything possibleto mitigate the possible losses.

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ECOLOGICALLY BALANCED AGRICULTURE URGED


[Text] Hefei, 7 June (XINHUA)--Seeking an ecologically balanced agricultureshould be the focus of China's agricultural modernization program, said scien-tists during a recent meeting on ecoagriculture.

This will bring about a new revolution in China's agricultural production andshould therefore be regarded as a matter of strategic importance, the scientistssaid.

They noted that the development of ecologically balanced agriculture will bringabout efficient farm production and hence more income to peasants. It willalso help purify and beautify the environment, improve the production and liv-ing conditions and build a new socialist countryside.

The more than 100 scientists put forward the following proposals:

-- To set up a national organization to provide unified leadership over theefforts and coordinate the steps in various parts of the country;

-- To formulate a law to protect the ecological environment of agricultureagainst pollution from urban areas;

-- To set up a complete education and technology popularization system includingthe establishment of a research institute and adding related courses to thecurricula of colleges and universities;

-- To carry out experiments in building ecoagriculture at different levels andin different forms;

-- To raise funds from a multiple channel for the ecological agriculture driveand encourage peasants to join hands in running farm and sideline produce pro-cessing enterprises; and

-- To coordinate the development pace of industry and agriculture to ease theshortage of energy and raw materials.

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STATE PLANNING COMMISSION ON AGRICULTURAL WORK

OW061605 Beijing XINHUA Domestic Service in Chinese 0805 GMT 2 Jun 87

[By reporter Zhou Yichang]

[Excerpts] Wuhan, 2 June (XINHUA)--The State Planning Commission held a nationaldiscussion meeting on agricultural planning work from 25 to 30 May in XianningCounty, Hubei, to discuss measures on how to steadily develop agriculture.

After analyzing the current situation in rural areas, comrades attending thediscussion meeting held that the 3d Plenary Session of the 1lth CPC Central Com-mittee has given great vitality to China's agriculture and rural economy. Thequestion of providing people with warm clothes and sufficient food has beenbasically solved. The situation in which agriculture has helped back China'snational economy has begun to change. The comrades pointed out: In order tomaintain a steady rate of growth in developing China's agriculture and ruraleconomy, we are now faced with two problems. First, we lack the reserve powerin further developing agriculture, and we have not completely rationalized theprices of farm products. In addition, the total area of farmland is on thedecline, while land fertility remains low. Our investments in agriculture areinsufficient. Also channels for circulation of farm products are often clogged.All this directly affects and hinders the steady development of agriculture.Second, as far as our national economy is concerned, we must increase the quan-tity and improve the quality of farm products in order to help the peoplethroughout the country to become comparatively well off. From this, we mustrealize the arduous nature of our tasks in maintaining steady growth in agri-culture.

In order to ensure steady growth in developing China's agriculture and ruraleconomy over a protracted period of time, the meeting held that it was quitenecessary to largely increase investments in agriculture within the state budgetin addition to the "Seventh 5-Year Plan." The 1990's will be an important per-iod for advancing China's agriculture to a new stage. The proportion of agri-cultural investments should be gradually increased on the basis of those of the1980's.

After summing up their experiences in developing China's agriculture and ruraleconomy over the past 30 years since liberation, the cadres of the planningcommissions at all levels attending the discussion meeting also exchanged views

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on how to readjust product mix in agriculture; exploit and utilize agriculturalresources such as farmland, pastureland and water resources; increase and usewell funds for agricultural production and construction; popularize agriculturalscience and technology; unclog channels for the circulation of farm products;and readjust the prices for farm products.

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PRODUCTION BASES BOOST FARM OUTPUT, EXPORTS


[Text] Beijing, 9 Jun (XINHUA)--The organization of several agriculturalproduction bases last year has resulted in more of China's farm products beingexported, today's "GUANGMING DAILY" reported.

Products now available on the international market include high-quality rice,mung beans, oranges, lychee, and peanuts, which are distributed fromproduction bases in Tianjin, Anhui, Fujian, Guangdong, Jiangxi, and Sichuanprovinces.

According to the report, last year, central and local governments jointlyinvested 170 million yuan (46 million U.S. dollars) to improve the bases in 28provinces, municipalites, and regions, and installed basic and hi-techfacilities for processing, preserving, and transporting farm products.

According to recent statistics, at the 113 production bases, combined outputvalue hit 26 billion yuan (7.03 billion U.S. dollars) in 1986, an 8.4 percentincrease over 1985.

In 39 production bases, grain output was over 11 million tons last year, anincrease of 6.8 percent over 1985. The bases sold 2.85 million tons ofcommodity grain to the state in 1986, 46 percent more than in 1985.

These production bases are planning to host a fair this autumn in Beijing todisplay and sell their high-quality agricultural products, the paper said.

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AGRICULTURE :ECONOMIC

READJUSTMENT OF RURAL INDUSTRIAL STRUCTURE URGED

Harbin HEILONGJIANG RIBAO in Chinese 5 May 87 p 2

[Article by Yu Zongyi [0060 1350 5030]: "Thoughts on Readjusting the RuralIndustrial Structure"]

[Text] Readjusting the rural industrial structure to adapt it to thedevelopment of a commodity economy is an important topic for rural reform. Inthis regard, Heilongjiang has conducted some practical experiments. Today,summarizing our experiences and examining them carefully can be verysignificant for future economic growth.

Since 1979, readjustment of Heilongjiang's rural industrial structure haspassed through three stages. 1) From 1979 to 1984, the area sown in cerealcrops was appropriately reduced, while the proportion of cash crops wasincreased; the area sown in coarse food grains was appropriately reduced,while the proportion of wheat, paddy, and other fine grains was increased. Theregional crop layout was readjusted, attention was paid to developingforestry, animal husbandry, and fishing, and a number of township enterpriseswere opened. During these six years, the province's total grain productionincreased at an average annual rate of 2.93 percent, and the output value ofcrops sown (at constant 1980 prices) increased 6.3 percent, while the outputvalue of forestry, animal husbandry, and fishing increased 9.8 percent. 2) In1985, major, overall readjustments were made, focusing on the internalstructure of cultivation. That year the ratio of grain to cash crops to othercrops, which had been 85.3 to 8.2 to 6.5, was adjusted to 84 to 10.4 to 5.6,with the area sown in grain cut back; the reduction in the area sown in high-yield corn was especially great, and there were severe natural disasters.Grain production fell sharply that year. 3) Microadjustment in 1986. The areasown in grain that year rose by 1.61 million mu, and the area in high-yieldcrops (corn, paddy) rose by 3,445,000 mu, and the proportion of cash crops wasmade more suitable. Although there were also significant natural disastersthat year, a bumper crop was still harvested, with grain production reachingrecord levels, and the entire rural economy experienced major growth.

Experience has shown that readjusting the industrial structure is a gradual,long-term process requiring positive exploration and caution; practice must beguided by the ideology of the commodity economy in order to overcome

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unreasonable growth; particular attention must be paid to preventing majorfluctuations in grain production.

1. The process of readjusting the rural industrial structure is a continuous,gradual process of improvement.

In each region and at all times, the industrial structure always comprises twoaspects, the rational and the irrational. The rational is relative, while theirrational is absolute. Given the level of development of our productiveforces and the consumer demand structure, we must affirm the rationalcomponent of the industrial structure while readjusting the irrational part.Constant changes in the productive forces and in social demand mean that thisreadjustment is a long-term, dynamic task that cannot be solved once and forall. Heilongjiang's current rural industrial structure seems fairly rational,but we must not rest on that basis. Future readjustment of the province'srural industrial structure must be considered in light of the timing and paceof certain specific adjustment measures in accordance with actual localconditions and be implemented smoothly according to plans.

2. Focusing on grain production is the key to readjusting the ruralindustrial structure and assuring a benign economic cycle.

Although Heilongjiang's grain production has tended to grow since the foundingof the People's Republic, there have been several ups and downs. The grainproblem has not yet been fundamentally solved. Grain production is the basicaspect of the agricultural system and the basis for solving other agricultural

problems. In Heilongjiang in particular, it is grain production that dominateseverything. The province's population has increased significantly sinceLiberation, while there has been a relative decrease in agriculturalresources; as the commodity economy develops, grain use will also increasesignificantly. Present industrial accumulation makes it difficult to providemore funds for agricultural production, and to a certain extent it must stillrely on low-priced supplies of agricultural products. Cultivation and theoverall development of the rural economy are generally determined by thedevelopment of grain production. This means that grain production directly andindirectly affects the growth of the economy. Therefore, readjustment of therural industrial structure must not ignore grain production. Overall,approaches involving a reduction in the area sown in grain and an increase inthe area of cash crops are not beneficial to economic development. If therural areas are to be made prosperous, they must develop products andindustries involving low inputs, high yields, and high returns; they must notlimit themselves to readjusting the planting structure or cutting back ongrain production.

3. Readjustment of the rural industrial structure must strive to get awayfrom cultivation, deal with markets, and rely on cities.

Getting away from cultivation means not focusing exclusively on cutting backthe area sown in grain and developing cash crops, or cutting back on grain toraise fish or plant grass or trees, but rather allowing surplus rural labor to

shift away from cultivation to other occupations, while at the same timeconstantly readjusting and improving the crop mix. Some should go into animal

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husbandry, fishing, and fruit trees, while others should move into secondaryand tertiary industries. Of course, in order to maintain the ecologicalbalance and reap greater economic returns from those areas unsuited toplanting grain, efforts to withdraw them from grain production and return tofish raising, animal husbandry, and forestry should be continued.

Dealing with markets means that product readjustment must involve forecastingmarket demand and carrying out "head-on readjustment." We must not merely lookto see what others are doing it; by the time it gets done, the marketsituation will have changed, leaving our products unmarketable. We should drawa lesson from the excess production in Heilongjiang of certain traditionalChinese medicines.

Readjustment of the rural industrial structure must not slight the role of thecities. Readjustment of the rural industrial structure is not an extension oftraditional agriculture; rather, it is the permeation of rural areas by modernindustrial production. Certain suitable advanced technologies, equipment, andscientific management methods from the cities should become levers forpromoting change in the rural industrial structure. Urban technologies, funds,equipment, and management should be selectively introduced into thecountryside, and technical departments and urban industrial enterprises shouldbe encouraged to become involved with the countryside, to develop resourcesand huge, potential markets for the means of production and consumption.Economic convection from the cities to the countryside will complete thereorganization of rural resources and achieve an optimum economic structure.

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CONTROL OF FAILING SUPPLY, MARKETING COOPERATIVES

Beijing NONGCUN JINRONG [RURAL FINANCE] in Chinese 16 Mar 87 pp 10-11

[Article by the Agricultural and Commercial Credit Department of theAgricultural Bank of China: "Comprehensive Control of Failing Supply andMarketing Cooperatives Requires Close Cooperation of Concerned Departments"]

[Text] Last year, the various agricultural banks throughout the countryachieved good results in clearing up the situation regarding use of loans bysupply and marketing cooperatives. These cooperatives are the backbone ofrural markets; in years past, they were instrumental in promoting ruraleconomic prosperity, but in recent years, with decontrol of rural markets andpoorly adapted ideology and work habits, their operations have shrunk and theyhave suffered severe losses. About 25 percent of China's grassroots supply andmarketing cooperatives are now experiencing losses; in some provinces, one-third of these cooperatives are failing. Many of these cooperatives have takenon excessive burdens; their output does not meet expenses, and theircumulative debt has increased year after year. This situation affects theoverall development of the rural commodity economy; it also occupies largeamounts of credit funds and impacts their turnover. According to statistics,at the end of 1985 the country's S&M cooperative system had 7,474,240,000 yuanin loans that could not participate normally in turnover. Of Jilin's 869cooperatives, 379, or 43.6 percent, were "empty shell" cooperatives, withaccumulated loans of 400 million yuan; of these, 22 cooperatives had gone intobankruptcy, owing 30 million yuan, which will be difficult to recover.

There are many reasons for this situation in the S&M cooperative system; beloware five main ones:

1. Policy-related losses, with no means of making them good, become aperpetual burden. In recent years, the prices of some commodities have risen,and the economic losses of state-run commercial enterprises have beensubsidized by the financial departments; those of the S&M cooperatives,however, have been absorbed by the cooperatives themselves. The commodityprice readjustments in 1981 and 1983 alone caused the nation's S&Mcooperatives to lose 1.5 billion yuan, accounting for 2.4 percent of thebanks' loan balance. In 1986, prices for minor fertilizers were lowered, andpolicy-related losses amounted to more than 600 million yuan. One-third ofthat was made up by financial subsidies from the central government, while

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provincial and county financial departments provided 400 million yuan; mostareas never saw any of this.

2. Excessive administrative interference, with burdensome assessments onenterprises. According to statistics from 13 provinces for the first sixmonths of 1986, the various types of assessments amounted to 100 million yuan.By administrative order, the S&M cooperatives in Shandong were required toreduce the price of cotton sold to textile departments by 5 to 10 percent,which caused losses of more than 60 million yuan. Such assessments are alwayscompulsory and cover as many as 20 different items, such as road construction,electricity, water improvement, roofing, security and environmentalprotection, family planning incentives, etc. The :S&M cooperatives are alwaysrequired to pay for these, with one county generally being assessed from300,000 to 400,000 yuan, and sometimes 500,000 to 600,000 yuan. This amountsto walking off with loans.

3. Poor management, and severe losses and waste. According to nationwide

statistics, at the end of 1985 the S&M cooperative system had 3,847,690,000yuan in problem commodities, and 3,626,550,000 yuan in problem funds, for a

total of 7,474,240,000 yuan, accounting for 8.3 percent of their totalcirculating funds of 90.47 billion yuan, and 11.1 percent of all bank loans.The Shandong S&M system (not including cotton) had a total of 557 million yuanin problem commodities, accounting for 22.7 percent of supply inventory and23.1 percent of bank loans; losses are forecast at 160 million yuan.

4. The contract responsibility and management systems are incomplete. SomeS&M cooperatives have contract bases that are too low, which means that theirincome does not meet expenses; some do not use contracts, dividing up profitsbut not accepting responsibility for losses; some managers run things poorlyand get transferred, and when the new manager arrives he does not payattention to the old books, so that the enterprise's burden snowballs; someare interested only in immediate and partial profits, turning their backs ontheir obligations while spending money wildly, so that their operatingproblems get worse and worse.

5. Credit management is loose, and the supply of funds is unrestrained.Because credit personnel are few in number and not very qualified, without aclear understanding of the responsibility system, and because some credit

policies are ill-suited to the demands of the newly developing situation,there is an unrestrained supply of funds, and enterprises are eating out of

the banks' "big pot of rice," which is another important reason for the manyidle loans.

We believe that the basic way to solve the problem of failing S&M cooperativesis to intensify reform. Some problems, however, require the positivecoordination of various departments to help in solving them, so that vigor canbe gradually restored and rural markets can be better served. To this end:

1. The S&M cooperatives must be positively helped to deal with their long-term burden. Policy-related losses should be made up by the financialdepartments and the higher concerned departments. If a one-time allocation isproblematic, a plan for installment allocations can be formulated. We

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recommend that the tax departments reduce or waive the operating tax andincome tax for losing cooperatives, with the amount reduced or waived beingused to make up the losses and replenish the circulating funds.

2. Measures should be taken by the S&M cooperative system to close down,merge, or transfer those "empty shell" cooperatives whose cumulative burden issuch that they cannot be saved. Under the leadership of the local government,a settlement group consisting of the cooperative and the bank should be formedfor an "empty shell" cooperative that has been closed down, so as to settlethe enterprise's commodities, assets, creditor's rights, and liabilities. Allassets of a closed cooperative revert to the county S&M cooperative, which isresponsible for collecting or paying all creditor's rights or liabilities. Inaccordance with the requirements of rural commodity circulation, the "emptyshell" cooperative may establish a cooperative according to readjustment ofthe economic zone, or see to the construction of a general store of suitablesize to supply the means of production and livelihood to the local masses.

3. Loosen credit policy and help the S&M cooperatives to invigorate theiroperations. The S&M cooperatives should be enthusiastically supported incarrying out system reform, offering comprehensive services, and increasingtheir internal vigor. Priority support should be given to buying marketableagricultural and sideline products from S&M cooperatives and to providingample funds needed for stocks of industrial goods; priority should be given toloans to operations offering good economic returns, for the development ofcommercially run industries and sideline operations in which the S&Mcooperative is the project manager; priority loans should go to urgentlyneeded commercial infrastructure; for funds tied up in losses due to policy orobjective causes before 1985, negotiations should be held with the bank sothat no penalty interest is added during the settlement period; funds tied upin problem commodities in "empty shell" cooperatives before 1985 should haveinterest waived during the settlement period.

4. S&M cooperatives should be assisted in strengthening their accounting andimproving their management. At the same time as we enthusiastically supportreform and invigoration of the cooperative system, we must strengthen loanmanagement and increase our supervision of the use of funds. Specific accountmanagement should be instituted for any problem commodities and fundsinventoried, and a plan formulated to deal with them; new instances ofdiversion or misappropriation of bank loans for capital construction and otherfinancial expenditures should be subjected to credit sanctions according toregulations, and the funds should be recovered on time; relending of bankloans or unlawful collection of high interest should be reported to theconcerned departments and severely punished, and the loans should berecovered; enterprises should be supervised and encouraged to augment theirown circulating funds according to regulations, and floating interest ratesshould be raised in cases of extra occupancy of funds not in accordance withplans; loans issued to failing enterprises should be strictly controlled, andenterprises suffering losses due to poor management must be required to turntheir losses into profits within a given period of time, with loan quotaseliminated and individual loan accounting and term management instituted; allloans to enterprises whose strength has been sapped and that are unable tosave themselves should be halted.

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In some areas, banks have recently been called on to halt or waive accountingon some loans to the S&M cooperative system; this is inappropriate. Problemswith funds for S&M cooperatives were caused by many factors. The problems mustbe solved by those who created them; all the conflicts cannot simply be dumpedin the lap of the banks. Banks rely primarily on deposits by the public as thesource for their loan funds; these deposits are short-term and reimbursable.When enterprises take loans from banks, they must repay them, and they mustpay interest in order to ensure that bank funds turn over normally. At thesame time, agricultural banks are also financial enterprises with independentaccounting that take responsibility for profit and loss, and they are notcapable of bearing the economic losses created by halting or waiving loanaccounting. Therefore, regardless of what operating mode the S&M cooperativesadopt, and regardless of what their situation is, agricultural banks should inno case be allowed to halt or waive interest on loans. The credit departmentsof all agricultural banks should ponder their actual situation and do surveysand research, setting the corresponding loan policies according to whether S&Mcooperatives are contracted, leased, or sold, establishing creditor's rights

and liabilities, providing credit services, and promoting economic developmentand expanded circulation.

13322CSO: 4006/690

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MEASURES TO MANAGE PROJECTS IN POOR AREAS

OW090611 Beijing XINHUA Domestic Service in Chinese 0201 GMT 8 Jun 87

[Text] Beijing, 8 June (XINHUA)--In order to make better use of central andlocal funds earmarked for eocnomic development in poor areas and make invest-ments and exercise management in accordance with development projects, the State

Council's Leading Group for Economic Development in Poor Areas, the FinanceMinistry, the People's Bank of China, and the Agricultural Bank of China re-cently formulated jointly the "Tentative Measures for Management of EconomicDevelopment Projects in Poor Areas Throughout the Nation."

The "Tentative Measures for Management of Economic Development Projects in PoorAreas Throughout the Nation" contains six chapters, namely, General Principles;

Selecting and Determining Projects; Verifying and Evaluating Projects; Implement-ing and Supervising Projects; Concluding Testing, and Accepting Projects; andOrganized Guidance for Projects. The tentative measures point out that makinginvestments and exercising management according to projects are intensive re-forms and progress in rural economic construction. Through the management ofthese projects, specific plans for economic development in poor areas will bedrawn up; limited funds will be pooled and used selectively in the most needyplaces; and investment will be made on the basis of scientific management pro-cedures to achieve better results in economic development and to train new-type management personnel.

The tentative measures stipulate; currently, the implementation of the projectinvestment system in using funds earmarked for poor areas is intended for pro-jects that require less investment, yield quick results, and turn out readilymarketable products; can be undertaken by and are beneficial to all households;

will create jobs for poor households; and can quickly solve the problems of foodand clothing for the masses. The baisc forms of these projects are servicecenters based on production activities of thousands of households and supple-mented by serialized comprehensive services in terms of fine-strain seeds, tech-nology, procurement, processing, storage, and transportation. These servicecenters are interrelated parts forming a commodity production network. Smallprojects suitable for independent development by poor households or joint de-velopment by several households may also be separately set up.

The tentative measures also note: Selection of economic development projectsin poor areas should be based on the availability of local resources and shouldconform to the overall plans and requirements of local economic development.

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There must be reliable markets for products turned out by these projects as wellas the necessary technology to ensure the quality and competitiveness of theseproducts. It is necessary to take into consideration other related factors suchas transportation, energy, and service netwroks so that resources can be fullyexploited and turned into commodities. Projects should be subjected toscientificverification and evaluation by experts before they are finalized. All depart-ments concerned should inspect and supervise units that implement projects undertheir charge to ensure that projects are well organized, coordination is good,problems are promptly solved, and projects are smoothly implemented. After thecompletion of a project, experience should promptly be summed up, acceptancetests conducted, written reports submitted, and rewards and penalties given out.Projects should be developed in an organized manner and essential organs set upto exercise leadership and management.

The State Council's Leading Group for Economic Development in Poor Areas andother departments stressed: In order to develop projects more successfully, itis hoped that all localities will earnestly implement the instruction of theState Council's leading comrades; pool all local and central funds earmarked forpoor areas and use them on essential projects; and thoroughly discard the prac-tice of extensively scattering funds among unimportant projects. Meanwhile, theyalso pointed out that to make better use of the state's newly added 1 billionyuan in discount loans for project development, all localities should appropriatea special amount of money from "funds to support the development of economicallyunderdeveloped areas" to serve as fees for technical training in coordinationwith the use of the discount loans. All departments concerned should activelysupport and earnestly implement this undertaking.

/12232CSO: 4006/747

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TWO PRICE SYSTEM FOR GRAIN PROCUREMENT, SALES URGED

Beijing JINGJIXUE ZHOUBAO in Chinese 26 Apr 87 p 4

[Article by Cai Guoxin [5591 0948 2450], Nanjing Grain Economics Institute:"Pervasive Study of the "Two Track System" For Grain -- Roundup on Discussion

Meeting About Economic Cntrol of Grain"]

[Text] A meeting about economic control of grain, the convening of which wasorganized by the Nanjing Grain Economics Institute, was held in Nanjing from16 through 21 March. The meeting discussed thoughts on the grain situationand goal models for grain flow in the economy, and emphasized problems withthe "two track system" for grain, including a pervasive discussion of theconcept, theoretical basis and practical basis of the "two track system", itspositive role and drawbacks, and how to perfect it and put it into practice.

1. Conceptual Problems About the "Two Track System" for Grain

a. The "two track system" means a two track price system, one track being thestate set price and the other being the market price. The grain price issueis thus the core and the crux of the "two track systems."

b. The "two track system" consists of dual channels for the buying and sellingof grain, one of which is fixed procurement and guaranteed sales at a uniformprice, the other being procurement at negotiated prices and sale at negotiatedprices. Development of the "two track system" does not mean development atthe same pace; procurement and sales at a uniform price have to be reduced andprocurement and sales at negotiated prices have to be expanded.

c. In the "two track system," the state controls a piece and the marketenlivens a piece. The piece that the state controls is the state quota that isto be fulfilled through economic contracts and by the peasants. The piecethat is enlivened by markets is the grain that remains after contracts havebeen fulfilled that must be released to enliven markets.

d. The "two track system" is a combination of plan and markets, meaning thatplanning methods and market regulation methods are used in the buying andselling of grain. These two economic regulatory mechanisms operate at the sametime in a basic system in which both are indispensable.

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The basis in economic theory and the basis in practice of the "two tracksystem."

1. The theoretical basis for the "two track system" is deemed to be thecommodity economy. The "two track system" for grain prices is a product ofcommodity economy production under specific conditions, and it is also theinevitable outcome of reform of the country's price system. The "two tracksystem: is a manifestation of the form of the country's price system reform.Briefly, this form has two main points: The first is the macroeconomic aspectof prices being controlled mostly by the state. The second is that the form ofprices should be a price system made up of multiple elements. Therefore, the"two track system" relates to the commodity economy; it has nothing to do withthe social system.

2. The theoretical basis for the "two track system" is the planned commodityeconomy. The "two track system" is an outgrowth of interaction between thelaws of planned proportional development and basic economic laws. Socialism isa system of public ownership that must practice a planned economy. Withoutstate macroeconomic control and no grain in the hands of the state, societymight easily get into trouble. However, there can be no repetition of theproduct distribution system under the former system; thus, the "two tracksystem" is an inevitable stage that a socialist planned commodity economycannot skip over. In this sense, it may be said to be related to the socialistsystem of public ownership and differes in character from dual prices.

In addition, one has to recognize the practical basis generated by the "twotrack system." Though grain is a special case, it is also a common commodity,the market regulation of which must follow commodity economy principles. The"two track system: is in keeping with the country's national circumstances andthe grain situation. It must be realized that there is a limit to priceregulation. If conditions are not right for it, complete relaxation of pricescan create harmful results. Consequently, all actions have to proceed from thebasic point of the fundamental interests of the people. In short, the "twotrack system" has risen as an accompaniment to the country's planned commodityeconomy, and has been explicitly proposed only during the economic reform ofrecent years. It is also a new issue currently being explored during reformof the socialist national economy.

2. The Positive Role of the "Two Track System" and Its Drawbacks

Positive Role:

a. The "two track system" can spur grain production and further improve grainexchange, distribution, and consumption to the benefit of producers, dealersand consumers.

b. It helps the opening up and enlivening of the national economy, and it cangive rise to markets that are controlled without being throttled, and that arelively without being chaotic, promoting a benign cycle in the nationaleconomy.

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c. It helps promote system reform in the grain economy and the correcthandling of the interests of the state, collectives and individuals to stirenthusiasm in all quarters and improve economic results.

d. It helps increase income and cut costs, and reduces state financialsubsidies. It helps an equitable distribution of grain, conversion of grain,consumption of grain, and transportation and storage of grain.

e. It helps stabilize market prices and helps social order and unity. "When

grain is stable, the nation is stable."

Major Drawbacks:

a. Certain contradictions, loopholes and frictions exist in the "two tracksystem." Unless well controlled, speculators may be provided opportunities andthe development of unhealthy capitalist tendencies may be fostered.

b. It is bad for readjustment of the structure of industry and forrationalizing the varieties of grain produced.

c. A lot of work is required and constant changes in numerous elements makescalculations extremely irksome.

3. How to Perfect and Implement the "Two Track System"

Some comrades advocate, first, mandatory administrative measures that makeclear to the peasants that fixed contract procurement is a duty, thefulfillment of which the broad masses of peasants should bend every effort.Second, they want to increase grain procurement prices as financial resourcespermit, doing all possible to operate in accordance with the laws of value.Third, they want to order two track priorities, devoting leadership energiesand policy measures to the main line of fixed contract procurement. Fourth,they want to form negotiated price dealings into a fist both vertically andhorizontally for concerted action. Thus, an agreed upon understanding oncontrol is necessary; operation has to be flexible; and distribution has to beequitable.

Yet another group of comrades believes that perfection and implementation of a"two track system" requires doing a solid job in the following severalregards:

First is to acknowledge the co-existence of the "two track system" with aplanned commodity economy, with consequent development of productivity,development of a commodity economy, increase in grain output, curtailment ofexcessive consumption of grain, putting an end to waste, and intensificationof controls over grain being priority matters.

Second, promotion of the "two track system" has to begin with a matching ofthe macroeconomy and the microeconomy, taking a firm grip on matches in threeregards, namely measures to match production, distribution, exchange andconsumption; measures to match the overall application of economic levers; andmeasures to match economic methods, administrative methods, and legal methods.

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Third, the core of the "two track systew" is price problems, prices having tobe the start in finding solutions. It has to be acknowledged that so long asthere is a dual circulation (parity and negotiated prices), parity andnegotiated prices may be interchanged and augmented; boundaries between thetwo should not be drawn too strictly. Consideration should also be given toslow, step-by-step readjustment of grain prices, at the same time changinghidden subsidies to open subsidies in order to be in a better position for thefinal straightening out of grain prices and reforming the grain pricingsystem.

Fourth, measures to strengthen administrative control are also necessary forthe promotion of a "two track system." The current focus is on the curtailmentof sales at a uniform price, which is workable and can be done easily in thecurrent situation of increased earnings by the people in cities and thecountryside. Some investigation will have to be done on the extent to whichcurtailment can be carried out, implementation being done followingquantitative and qualitative analysis.

Fifth is the need to increase Party leadership of grain work, to strengthengrain control organizations, to institute legal system controls, and toestablish and perfect grain economy regulations.

9432CSO:4006/708

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GREATER PRODUCTION SPECIALIZATION, MORE COMMODITY PRODUCTION

Beijing NONGMIN RIBAO in Chinese 1 May 87 p 1

[Article by Reporter Tong Nong [4547 6593] and Correspondent Zhang Xiaoou[1728 1420 7743]: "Greater Specialization of Production and More CommodityProduction. Great Increase in Number of Rural Specialized HouseholdsThroughout the Country During 1986. State Statistical Bureau Provides MostRecent Information To the Newspaper"]

[Text] The Rural Department of the State Statistical Bureau has provided thenewspaper with the most recent information as follows: A tremendous increasetook place nationwide during 1986 in the number of all kinds of ruralspecialized households. According to uniform statistics for the whole country,the number of specialized households of all kinds reached 3,696,000, a jump of16.3 percent over 1985 reaching 1.9 percent of all rural households.

Specialized households showed the following features in their developmentduring 1986: The range of operations continued to expand and the number ofhigh income households increase very greatly. The number of specializedhouseholds engaged in secondary and tertiary industries amounted to 63.2percent of all specialized households. The degree of specialization and ofcommodity production increased very quickly for an increased contribution tothe country.

Rise in the labor productivity rate and increase in the degree ofspecialization and of commodity production were some of the most salientfeatures in the development of specialized households during 1986. Collationof statistics from a portion of provinces, autonomous regions and directlyadministered municipalities shows earnings per capita of 2,842 yuan forspecialized households in 1986, which was 2.85 times again as high as forlabor in general in these areas. Earnings from specialization by specializedhouseholds engaged in secondary and tertiary indsutdry accounted for 81.5percent of the total. Income from the sale of products by specializedhouseholds engaged in farming, forestry, animal husbandry, fishing, andindustry accounted for 78.1 percent of gross income from the five industries.

Survey shows the number of specialized households engaged in primaryindustries to have increased by only 2.8 percent during 1986; however, thenumber engaged in secondary and tertiary industries increased by 14.6 and 17.4

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percent respectively to more than 60 percent. The views of experts in thisregard is that the rapid development of business, food and drink, and serviceindustries as a result of the quick results and high earnings they produce isan objective requirement for readjustment of the structure of rural industry.A tremendous increase has rtaken place in the number of householdsspecializing in construction in the wake of the "house building craze."Meanwhile, growth of specialized households engaged in primary industries hasslowed and has been affected by many factors, such as fodder problems, whichhave reduced by 13.4 percent the number of households specializing in animalhusbandry. Since the production cycle is long and results are slow in comingin forestry, a 9.8 percent decrease has taken place in forestry industryspecialized households.

Analysis of statistical data shows the increase in specialized households ashaving been very inconsistent in recent years, with large fluctuations. Theineptitude of specialized households themselves aside, this has been mainlyattributable to lack of understanding of policies and lack of guidance andsupport in various regards. Units concerned feel serious attention should begiven to this.

9432CSO:4006/708

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IDEAS FOR BIGGER PAYOFF FROM INVESTMENT IN AGRICULTURE

Taiyuan NONGYE JINGJI XIAOGUO [AGRO-ECONOMIC RESULTS] in Chinese No 2, 25 Apr87 pp 2-5

[Article by Lei Xilu [7191 6932 4389] and Ma Xiaohe [7456 2556 3109], Planningand Economic Research Institute, State Planning Commission: "Current Problemsin Agricultural Inputs and Their Solution"]

[Text] Current Major Problems in Agricultural Investment

a. Decline in the Percentage of State Investment in Agriculture

During the Sixth 5-Year Plan, national investment in the capital constructionof agriculture amounted to 17,780,000,000 yuan, or 27.8 percent less than theFifth 5-Year Plan investment of 24,610,000 yuan, and it was 5.2 percent of thetotal nationaL investment in capital construction. Not only was it less thanhalf the 10.5 percent of the Fifth 5-Year Plan period, but it was also thelowest of any of the six 5-year plan periods since founding of the People'sRepublic. Since 1979, investment in the capital construction of agriculture asa percentage of total investment in capital construction declined for 6 yearsin a row from 11.1 percent in 1979 to 9.3 percent in 1980, to 6.1 percent in1982, to 6 percent in 1984, to 4 percent in 1985, which was the lowest yearfor investment in the capital construction of agriculture in the more than 30years since founding of the People's Republic. In the USSR, investment in thecapital construction of agriculture as a percentage of total nationalinvestment in capital construction rose from 11.5 percent for the period 1961through 1965 to 16.6 percent for the period 1971 through 1975, and rose againto 18.5 percent for the period 1976 through 1980. In recent years, it has beenapproximately 17 percent in Hungary and more than 20 percent in India.

State investment in the capital construction of agriculture as a percentage ofthe gross output value of agriculture (not counting the output value ofindustry at the village level and below) went from 2.75 percent in 1978 to2.63 percent in 1980, and has declined to approximately 1.4 percent since1981. In 1985, it dropped to 1.44 percent, which was 48 percent lower than in1978. This percentage for China is very much lower than the 42.3 percent forWest Germany, 36.1 percent for France, and 16.7 percent for Denmark, and isalso lower than for the USSR and the countries of eastern Europe.

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As a result of the decline in the percentage of investment in the capitalconstruction of agriculture in recent years, a decline has taken place in thepercentage of fixed assets relative to the gross output value of agriculture.The amount of fixed assets capital per 100 yuan of the gross output value ofagriculture (not including the output value of village operated industries)declined from 54.50 yuan in 1980 to 45.50 yuan in 1983, a one-sixth decline.China's 46 yuan of fixed assets per 100 yuan of output value is very much lessthan the 640 yuan of Japan, the 460 yuan of West Germany, the 450 yuan of theUnited States, the 400 yuan of France, and the 112 yuan of the USSR.

Statistical data from water conservancy units show 2.11 billion yuan as havingbeen assigned as farmland water conservancy subsidies to all provinces, theactual amounts provided by all provinces themselves having been 1.8 billionyuan in 1980, 1.37 billion yuan in 1981, 1.3 billion yuan in 1982, 1.2 billionyuan in 1983, and 1.16 billion yuan in 1984 or 45 percent less than theassigned quota for 1980.

Even though peasants themselves have increased fixed assets of a productionnature in recent years; nevertheless, most such assets are used in industrialsideline occupations, few of them being used in agricultural production. As aresult of the diversion to other purposes of agricultural water conservancyfunds by all jurisdictions and the effects of factors such as prices, therehave been no funds available for major overhauls of agricultural projects andfacilities, or for their replacement or renovation. The problem of thecollection of water fees for water conservancy projects has not been solvedsatisfactorily; everywhere in the country there has been a large amount ofdamage to agricultural capital construction projects and facilities; theutilization rate is not high; and the transfer of some facilities out offarming to other agricultural units or non-agricultural units has resulted inthe amount of fixed assets per mu used in farming being less than half that ofthe past several years in some provinces and regions.

b. Reduction in Material Inputs Into Agriculture

Up until 1984, the trend was largely toward gradual increase in theagricultural use of machines, chemical fertilizer and pesticides. In 1985, theamount of chemical fertilizer used nationwide was 73,105,000 tons (actualfigures), a 1,844,000 ton decrease from 1984, and a 740,000 ton decrease from1983. Use of pesticides figured in terms of comparable prices showed a 143million yuan reduction from 1984, or a 7.4 percent drop in investment inpesticides. Sales of chemical fertilizer during January and February 1986, andsales of pesticides from January through March 1986 were lower than for thesame period in 1985. Despite a slight rise over the same period in theprevious year in sales of chemical fertilizer and pesticides from Januarythrough April, they did not return to the levels of the same period in 1984.In 1985, 852,357 large and medium tractors were in use, 1,557 fewer than in1984, and 1,103,000 large and medium size tractor-drawn implements were inuse. This was not only 132,000 fewer than the 1984 number, but also 89,000fewer than the 1978 number. Despite a rise over the previous year in thenumbers of small tractors and hand tractors used in agriculture in 1985, mostwere used in non-agricultural activities. As a result the ratio between themand small associated farm machines and implements fell from the 1 to 1.2 of

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1980 to 1 to 0.8. Forty-six percent of the small tractors and hand tractorsthat were part of the 1985 increase were without associated farm machines andimplements. In 1985, power machinery with a total of 78,243,000 horsepowerwere used in agriculture for drainage and irrigation, 296,000 horsepower lessthan in 1984. There were 47,000 fewer mechanized wells than in 1984.

1. Decline in agricultural mechanization. During 1985 the machine plowed area,the machine planted area, and the machine harvested area nationwide wasrespectively 7,194,000 mu, 3,321,000 mu and 310,000 mu less than in 1984. Thisincluded a more than 93.4 million mu reduction from 1978 in the machine plowedarea, a decline of 15.3 percent.

2. Reduction in irrigated area nationwide. Though the construction of waterconservancy in recent years has increased the effectively irrigated areanationwide by tens of million mu; nevertheless, reduction in the irrigatedarea resulting from failure to make repairs or scrapping of projects and fromland takeovers for construction has exceeded the area increased. Theeffectively irrigated area nationwide reached 660,540,000 mu as of the end of1985, which was 6.26 million mu less than in 1984 and 13.94 million mu lessthan in 1978 for a 2.1 percent decline. There are several thousand-oddirrigation zones with an area of 10,000 mu or more that have not been fullyequipped, and there are more than 500,000 mechanized wells that have not beenfully equipped, and the in-service rate for those mechanized wells that havebeen fully equipped is only approximately 89 percent.

c. Decline in Amount of Agricultural Labor and Drop in Quality

Simultaneous with a decline in the amount of investment and material input hasbeen the appearance of three trends toward change in the input of animatelabor in some areas.

First of all, the decrease in the input of animate labor into agriculture hasbeen too great. With development of the rural economy and the nationaleconomy, and a rise in the agricultural labor productivity rate, a laborsurplus has taken place in agriculture (mostly in farming). The surplus laborin farming had to move gradually into forestry, animal husbandry, sidelineoccupations, the fishing industry and non-agricultural jobs with no loss ofgrain production. However, in economically developed areas and in poorlydeveloped areas, the outflow of labor from farming was too fast. Numerousyoung and able-bodied workers and "able persons" bounded out the "agriculturaldoor" leaving too few people in agriculture (mostly farming), and most ofthese were old, young, women, or feeble (termed the International WorkingWomen's Day Corps and the International Children's Day Corps). The quality ofthe workforce declined sharply.

Second, in many areas, agricultural accumulations had declined or had beenwiped out. During the 1960's and the 1970's, each member of the ruralworkforce in the country devoted 10 to 15 hours of labor each year to thecapital construction of farmland; today there is very little of this.

Third is a decline in the number of specialized households in agriculture. In1985, there were 1,079,000 fewer specialized households in villages throughout

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the country than in 1984, and 711,000 or 65.9 percent of this decrease hadbeen among specialized households engaged in farming and animal husbandry. Thereduction in specialized households engaged in farming amounted to 54 percentof the total number of rural specialized households nationwide.

d. Not Very Good Economic Results From Inputs Into Agriculture

Comparison of the past 10-odd years with the 1950's shows a lengthening ofwork time for capital construction in agriculture, an increase in constructioncosts, and a decline in the utilization rate for agricultural fixed assetsthat have been turned over after building (a decline from the more than 80percent of the 1950's to between 60 and 70 percent during the past severalyears). The utilization rate for fixed assets in being is not high, nor havethey fully lived up to expectations. Calculations made by authoritiesconcerned show the real performance of agricultural capital construction asbeing between 50 and 60 percent of expectations. For example, the utilizationrate for the total power of farm machines nationwide is only between one-fourth and one-fifth; the effective utilization of water from water-carryingand irrigation projects is only 30 to 40 percent, and the utilization rate forchemical fertilizer used in agriculture is also very low. In addition,differences between one area and another and one industry and another in thedirection and make-up of inputs into agriculture are not entirely rational,with the result that inputs can scarcely bring about complete benefits for therural economy.

Decline in short-term investment in agriculture can directly impairagricultural production in the current year; decline in long-term investmentwill cause a lack of reserve strength for the development of agriculture; andpoor economic results from inputs can completely debilitate agriculturalproduction. They are all preludes to a regression in agriculturalproductivity. The decline in grain output by more than 50 billion jin in 1985was entirely attributable to the foregoing factors. Unless this problem issolved, it is bound to impair fulfillment of plans for agriculture during theSeventh 5-Year Plan and for the end of this century.

2. Counteractions For Solution

In order to maintain reserve strength for the development of agriculture, tofulfill the strategic tasks of the Seventh 5-Year Plan and for the end of thecentury, a series of problems will have to be solved, and an increase ininputs and a rise in economic results are main problems that must be solved.The following counteractions are tentatively offered in view of the foregoingproblems.

a. Need To Devote Serious Attention to the Strategic Position of Agriculturein the Development of the National Economy

With the enormous increase in output of agricultural and sideline products ofrecent years, the basic role of agriculture has come to be slighted in thethinking of quite a few people. The main energies of leaders in manyprefectures, counties, and townships have shifted from agricultural to non-agricultural industries. Historical experience has demonstrated that when

68

problems arise in the foundation that is agriculture, there is bound to be anadverse affect on China's planned development of a commodity economy. Reformof the country's economic system during the past 2 years has been carried outfrom a foundation of achievements scored in the reform of agriculture and thefairly rapid development of agricultural production. Should agriculturalproduction stagnate without moving forward, a speed up in future reform of thecountry's economic system will become difficult, and the period of overlapbetween the new and the old system will be lengthened causing unnecessaryfrictions between the systems and losses. This is the truth of the statementsthat "without grain, there is chaos," and "without agriculture, there isinstability." Therefore, solution to the problem of inputs into agriculturerequires, first of all, a correct understanding and serious attention to thebasic role of agriculture.

b. Need To Increase Agricultural Inputs

The Seventh 5-Year Plan calls for a 1990 gross output value of 353 billionyuan (not including the output value of brigade-operated industries), a grainoutput of between 850 billion and 900 billion jin, and a cotton output of 4.25million tons. Calculations based on the need for 0.54 yuan in agriculturalfixed assets for each yuan of agricultural output value in 1980, approximately190 billion yuan of agricultural fixed assets will be needed in 1990. Thecurrent amount is approximately 120 billion yuan, so another approximately 70billion yuan in fixed assets will have to be newly added during the Seventh 5-Year Plan. Figured at a fixed assets formation rate of 65 percent, aninvestment in agriculture during the Seventh 5-Year Plan totalingapproximately 108 billion yuan will be required.

How much national investment in capital construction will be required? Figuredin terms of the national increase in grain output between 1953 and 1980 of 100billion jin, the national investment in capital construction will increase byapproximately 25 billion yuan. On the basis of 900 billion jin of grain beingproduced in 1990, a national investment in capital construction of more than35 billion yuan will be required during the Seventh 5-Year Plan period. Thiswill be approximately 32 percent of the total investment in capitalconstruction needed in agriculture. The value of agricultural fixed assets inbeing throughout the country at the present time is approximately 120 billionyuan. At a rate of 5 percent per year of the original value of fixed assetsfor replacement and improvements, or approximately 6 billion yuan, 30 billionyuan will be needed during the Seventh 5-Year Plan. An additional nearly 100billion yuan in construction funds and working capital will be required forthe development of township and town enterprises, and for the building ofrural market towns.

In addition, another approximately 70 million horsepower of newly addedagricultural machine power will be needed by 1990, and approximately 90million tons of chemical fertilizer plus other materials used in agriculturewill be needed. In order to be able to provide the foregoing inputs, wesuggest the following:

1. Increase in the amount of state investment in agricultural capitalconstruction, and phased increase in the percentage of investment in

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agricultural capital construction. It is recommended that during the Seventh5-Year Plan, an investment of 500 billion yuan investment in capitalconstruction be provided by state-owned units, and that an investment of 375billion yuan be provided by central government units, including an investmentof 14.68 billion yuan in agriculture, water conservancy and meteorology, 87percent more investment than during the Sixth 5-Year Plan and amounting to 3.9percent of investment provided by central government units, or slightly lessthan the 4.5 percent of the Sixth 5-Year Plan. It is recommended that centralgovernment units concerned gradually increase investment in agriculture aseconomic development and increase in financial revenues permit. Localgovernments at all levels should act in the spirit of instructions containedin 1986 Document No. 1 from the central government, which said: "Allprovinces, autonomous regions, and directly administered municipalities, aswell as all counties, are to make sure to use properly all categories of fundsprovided by the central government and not divert them to unintended purposes.Insofar as possible, more money should also be invested in agriculture out oflocal public funds to reverse the situation of decrease little by little in

local investment in agriculture. Investment in water conservancy should berevived as quickly as possible to the 1980 level when it was paid for out ofpublic funds." Investment in capital construction for agriculture by state-owned units during the Seventh 5-Year Plan should thus reach approximately 35billion yuan, the percentage of investment in agriculture thereby reachingapproximately 7 percent of the percentage of investment in capitalconstruction by state-owned enterprises for an increase over the 5.2 percentof the Sixth 5-Year Plan. It is recommended that it be gradually revived toapproximately 10 percent during the 1990's.

It is recommended that following reform of the public finance system, localresponsibility for small farmland water conservancy, and for water and soilconservation fees be restored as quickly as possible to the national 2.11billion yuan level of 1980 when these costs were paid out of public funds.

State investment in capital construction for agriculture is used primarily inprojects that play a major role in the development of agriculture such as theharnessing of large rivers, the construction of master water conservancyprojects, the planting of forests and grasslands that provide ecological andsocial benefits, and such major projects, the building of agriculturalcommodity bases, and the building of technical facilities for a system thatprovides services to agriculture before and after production, for the buildingof a system for agricultural education, scientific research, and technicalpromotion endeavors, and construction to change the situation in needy areas,etc.

b. Capital construction for agriculture will require an investment of 108billion yuan during the Seventh 5-Year Plan, In addition to a recommendedinvestment of approximately 35 billion yuan by central and local governmentstogether, the remaining 73 billion yuan investment and approximately 30million yuan required for replacement and improvement of fixed assets, as wellas the several hundred billion needed for the development of townshipenterprises, for the building of rural market towns, and for the developmentof the rural economy will have to come mostly from rural collectives and fundsraised by the peasants themselves, accumulations from agricultural labor, and

70

the collection of reasonable fees for water conservancy projects and otheragricultural facilities. Banks and credit cooperatives will also have to playa role in amassing capital to support agriculture and developing lateraleconomic links between the city and the countryside, and some foreign capitalwill be attracted, etc.

c. Serious attention to labor accumulations, advocating and encouraging laborto invest in shares to make full use of thet plentiful strength of thecountry's labor resources. Were every member of the rural workforcethroughout the country to devote between 10 and 15 days of labor each year toconstruction, that would amount to between 20.8 and 31 billion workdays. At arate of 2.50 yuan per workday, the total accumulation from labor would bpbetween 52 billion and 78 billion yuan.

d. Further guiding of peasants and rural enterprises in the correct handlingof the correlation between accumulation and consumption. During 1984, 55.4billion yuan was invested in rural fixed assets, and rural accumulationsamounted to approximately 62 billion yuan, increap.ing by 41.6 billion yuanfrom the 20.4 billion yuan of 1978 for an average annual increase of 6.9billion yuan. If there were an average annual increase of 7 billion yuanduring the Seventh 5-Year Plan, rural accumulations could reach 104 billionyuan by 1990, and rural accumulations during the Seventh 5-Year plan wouidtotal approximately 450 billion yuan. Were 60 percent of this to be used fornon-productive construction (in 1984, non-productive construction amounted toapproximately 48 percent of accumulations), another 180 billion yuan could beused to increase investments in fixed assets used for production and toincrease available working capital.

e. Need For Steady Increase in Economic Results From Investment

1. First, there has to be an increase in management, maintenance, repairjreplacement and equipping of existing agricultural capital constructionprojects and facilities to increase utilization rates so that full use is- madeof them. This requires less investment than new construction and the purchaseof new equipment, and benefits show more quickly and-are greaterý. Ifassociated tasks such as improved management and repair of water, conservancyprojects increased the effective utilization rate for water from the current30 to 40 percent to 50 or 60 percent, and attention were paid to scientificIrrigation, existing facilities could increase the irrigated area by nearly 10million qU.

2. Simultaneous with increase in investment in materials should be bettercontrol over and crational use of seeds, chemical fert.ilizer and pesticides toimprove.benefits from increased yields.

-3. Serious attention should be given economic benefits from funds to supportagriculture. Though the state has not provided much funds for the support ofagriculture for a long time, economic benefits have not been good from thosefunds that have been provided. Limited funds have not have produced thebenefits they should have produced. It is suggested that provinces,autonomous regions and directly administered municipal governments centrallyplan the use of funds and loans for support of agriculture from vatious units

71

in the country, and that they be invested on the basis of uniform plans and

construction programs in construction projects for production that relate to

the public interest and economic development. A scientific method and

procedures should be phased in for evaluating the economic results received

from funds for the support of agriculture that have been invested for

improvement of feasibility studies. Capital construction projects must be

handled strictly in accordance with.capital construction procedures. Control

must be strengthened over every stage of planning, design and construction,for overall balance. Some state investment in capital construction may be

changed from uncompensated investment to compensated investment. In short,

every effective measure should be adopted to improve steadily economic results

from investment in agriculture.

Implementation of the foregoing policies also requires establishnent of a

group of overall mechanisms to help development of agricultural productivity

and to stir dctive investment by the peasantry, including those for control

ovef the use of agricultural funds and inputs of materials used in

agriculture, for labor accumulations, tax collection and price regulation etc.

9432

CSO:4006/701

72


ANHUI TO SET UP MORE GRAIN BASES

Hefei ANHUI RIBAO in Chinese 28 Apr 87 p 1

[Article: "Province To Set Up 10 More Commodity Grain Base Counties. Increasein Agricultural Investment For Development of Grain Production"]

[Text] Nine of the 10 commodity grain base counties to be set up in theprovince are wheat production base counties. The other one is a premiumquality rice production base county. The ten counties are Woyang County,Mengcheng County, Fuyang County, Linquan County, Taihe County, Xiao County,Suixi County, Wuhe County, and Taihu County. These 10 counties have 19.4percent of the province's total population and 23.5 percent of the province'stotal cultivated land area. Their gross output of grain amounts to 17.7percent of the province's gross grain output, gross output of wheat amountingto 33.58 percent of the province's gross output. Grain output is 450 kilogramsper capita of agricultural population. For many years in a row, these countieshave provided the state with more than 50,000 tons of grain annually, and theyhave an enormous potential for the development of grain production.

Anhui Province has scored outstanding results from the concentration ofcapital for the building of commodity grain base counties beginning with theSixth 5-Year Plan period, and it has accumulated experience as well. These 10counties were the first group of commodity grain base counties to be plannedduring the Seventh 5-Year Plan by both the country and Anhui Province. As theamount of investment in agriculture by the state and the province increases,the 56 counties in the province that provide the state with 50,000 tons ofcommodity grain annually will gradually be built into commodity grain basecounties. The state and the province plan to put a total of 40 million yuaninto these 10 commodity grain bases, the funds to be alloted during 1987 and1988, the state and local jurisdictions jointly investing funds and materialsat a 1 to 1 ratio. Most of this money will be used for basic facilitis thatdirectly increase grain production, and for urgently needed promotion ofagricultural techniques, breeeding of fine varieties, administration andmanagement, and agricultural mechanization services in order to bring intobeing as quickly as possible overall capabilities for consistent andoutstanding increases in grain output.

At the present time, these 10 commodity grain base counties are working hardon the preparation of building plans that meet state and provincial governmentrequirements, and on the firming up of plans for local use of funds andmaterials.

9432 73CSO:4006/708


FOREIGN FUNDS HELP MECHANIZATION IN HEILONGJIANG


[Text] Beijing, 7 June (XINHUA)--Land reclamation farms in northeast China'sHeilongjiang Province have accelerated the pace of farm mechanization over thepast few years, thanks to introduction of foreign technology and funds.

According to an official from the province's State Farm Administration, theland reclamation farms in the province have conducted economic and technologicalcooperation on 20 projects with more than 10 countries and regions, using aforeign investment totalling 14,000 U.S. dollars, 85 percent of which were softor interest-free loans.

Cooperation projects included procurement of advanced farm machines, construc-tion of modern state farms, importing advanced teaching aids and research andresearch equipment and sending students to study abroad.

Heilongjiang Province is one of China's major grain producers, whose grain out-put has increased at an average annual rate of 5 million tons over the past6 years to reach 45 million tons last year.

The land reclamation area in the province has 101 state farms, covering 2 mil-lion hectares of farmland. Another 730,000 hectares remain to be developed.

In 1978 the state began to launch a pilot mechanization project at the YouyiState Farm in eastern Heilongjiang by using foreign investment and technology.The state invested 1 million U.S. dollars in buying 62 peices of equipment fromthe United States, which helped mechanize the whole process of farming fromploughing, field management, fertilizer application to weeding and harvesting.The pilot project with 48 workers produced 39.69 million kg of grain by the endof last year, averaging more than 4 million kg a year, and reaped a profit of3.86 million yuan, averaging 429,000 yuan a year. Its grain output per agri-cultural worker is 220,000 kg and its profit per workers is more than 20,000yuan. By the end of last year, the project already recovered more than 6 mil-lion yuan, more than double that of state investment.

TheHonghe Farm, located in Tongjiang County in the eastern part of Sanjiangplain, is a Sino-Japanese joint venture. The Japanese side provided a loanof 13.5 million U.S. dollars. The farm introduced the equipment from the UnitedStates and Japan.

74

From 1981 to 1986, the farm paid back the loans with soybean produced. Thefarm produced a total of 23,000 tons of grain and bean and had 12,600 tonsturned over to the state last year resulting in a profit of 400,000 yuan.

Heilongjaing Province signed a loan and credit agreement with the World Bankand the international development association for buying tractors, combine har-vesters and irrigation machines for use in reclaiming 200,000 hectares of land.

The Australian Government also provided aircraft for farm use and transporta-tion means for establishing a land reclamation aeronautic experiment station.The Canadian Government aided the land reclamation area with some teaching andresearch equipment.

Most of the projects are experimental in nature, said an official from theState Farm Administration. The purpose is to explore ways ot modernizingChina's state farms and accelerating the farm modernization program in thecountry as a whole. He said that the administration will create more favorableconditions to attract foreign investors.

/12232CSO: 4020/206

75


HUNAN USES BACTERIA TO RAISE FARM OUTPUT

0W200928 Beijing XINHUA in English 0715 GMT 20 May 87

[Text] Beijing, 20 May (XINHUA)--Central China's Hunan Province has startedapplying bacteria to seeds and fields in a bid to increase the output ofgrain, cotton and rape, today's ECONOMIC DAILY reported.

According to a recent joint survey by the State Economic Commission and theMinistry of Agriculture, Animal Husbandry and Fisheries, "Hunan saw increasesin rice output up to 31.8 percent; wheat, up to 25.8 percent; corn, up to19.8 percent; spring sweet potatoes, up to 16.9 percent and summer sweetpotatoes, up to 25.3 percent."

"Mixed with seeds of spread on crops, the new 'output increase bacteria' cancheck the grwoth of harmful bacteria, promote plant growth, and make plantsmore resistant to disease," horticulturists said.

"The bacteris was isolated by the Beijing Agricultural University," thereport said, "and last year, Hunan applied it to 775,000 hectares of land."

Experts hope the bacteria will boost China's grain, cotton and oil-bearingseed output after it is introduced in more areas.

/12232CSO: 4020/206

76


SHANDONG CREDIT COOPERATIVES DEVELOP

Beijing NONGCUN JINRONG [RURAL FINANCE] in Chinese 16 Mar 87 pp 22-23

[Article by Shen Jiaao [3088 1367 7663] and Liu Zeliang [0491 3419 0081]: "NewGrowth in Operating Results of Shandong Rural Credit Cooperatives"]

[Text] On the basis of the first-ever surpluses in the 30 years since thefounding of the People's Republic realized in 1985 by Shandong's rural creditcooperatives, they continued to strengthen their operations and management in1986, realizing surpluses for a second year and leading to new growth in theiroperating results. The province's 2,180 credit cooperatives had a totalsurplus of 210 million yuan, a 27.3 percent increase over the previous year;average profit generated per worker was 7,291 yuan, an increase of 18 percentover the previous year.

I. Available Funds Increase Sharply

In 1986, the province's credit cooperatives adopted effective measures andtreated fund-raising as their most important task; there was a major increasein deposits of all types, bringing the level of available funds to an all-timehigh. In 1986 the province's credit cooperatives increased their savingsdeposits by 2.1 billion yuan, with the balance at year's end reaching 10.1billion yuan. The average monthly balance for all deposits was 10.5 billionyuan, a 22.8 percent increase over the previous year; apart from the paid-updeposit reserves and the turnover funds for withholding, the average monthlytotal of available funds among the province's credit cooperatives reached 6.5billion yuan, an increase of 27 percent over the previous year. New situationsdeveloped in four areas of fund-raising work as a whole:

1. The reputation of the credit cooperatives was improved. With fiercecompetition for savings deposits, the credit cooperatives undertook activeadvertising for savings, which greatly exceeded the previous year's in bothdepth and breadth; radio, television, and print advertising was more widelyutilized, and other new forms of advertising continued to spring up; withmajor improvements in coverage, the cooperatives' reputation was steadilystrengthened, and more and more peasants turned to deposits in creditcooperatives. In 1986, the average peasant household increased its deposits by130 yuan.

77

2. Credit outlets opened everywhere, both in the cities and in thecountryside. As the rural commodity economy develops, and peasant incomescontinue to grow, demands on the cooperatives' deposit services continue torise. The province's credit cooperatives opened up 68 new branches in markettowns where economic activity is especially brisk; urban and suburban creditcooperatives opened up 293 new savings banks in combined urban and ruraldepartments and in farm trade markets in county seats. At year's end theprovince had 1,066 savings banks and 1,035 branch credit cooperatives, with anaverage of 16 per county.

3. Operations conducted by field personnel increased. The various creditcooperatives adopted mini-plans for field personnel, assessing themperiodically and adopting measures to reward the industrious and penalize thelazy, using economic methods to mobilize the enthusiasm of field personnel forhandling savings operations. The many farm credit personnel took up-to-datesavings information into the villages, providing services to households, notonly offering advice on developing production to enterprises and farm familiesbut also taking in large sums of collective and individual deposits. ComradeShen Ruihua [3088 3843 5363], a provincial model worker, went around tovillages and households month after month, taking in 10,413 deposits in 1986,amounting to 1.5 million yuan, or an average of 29 deposits and 4 ,110 yuan aday.

4. Credit agency operations are increasing steadily. At the end of 1986,there were 44,894 credit agencies in the province. In the last year, the focushas been on ideological reorganization, organizational consolidation, andprofessional guidance for credit agencies, which has ensured the healthydevelopment of credit agencies. At year's end, the credit agencies had morethan 3.27 billion yuan in savings deposits, an average of 730,000 yuan peragency and an increase of 14 ,000 over the previous year; the deposit balanceat the Zhuji Village Credit Agency in Zhijie District, Yantai, reached 9.36million yuan.

II. Results of Application of Funds Clearly Improved

In 1986, the province's credit cooperatives issued 10.4 billion yuan in loans,a 42 percent increase over the previous year; the average monthly balance forall loans was 5.8 billion yuan, accounting for 55 percent of the averagemonthly balance of all deposits, an increase of 480 million yuan over theprevious year. The cooperatives made full use of differences in time, place,and project, rationally adjusting the application of funds in order to achieveoptimum benefits for society and for themselves. By rationally regulating thedirection in which funds were used, they promoted development of the ruralcommodity economy, and development of the commodity economy in turn causes thecooperatives' deposits to grow, so that their funds are beginning to create abenign cycle. Three new features characterized the overall direction ofcredit:

1. Agricultural production loans increased more than did other types ofloans. All the credit cooperatives conscientiously implemented the policy of"refusing to slack up on grain production while positively developingdiversification." They issued 46.6 percent more loans for planting, stock-

78

raising, and other types of production than they did the year before; the

proportion of production loans rose from 25 percent to 36.1 percent. The

increase in loans for grain production was especially great.

2. Loans to enterprises for circulating funds increased more than did loansfor fixed assets. The rapid growth of township enterprises has created ashortage of funds, and the credit cooperatives, following the principle of"differential treatment and priority support" according to local naturalresources and characteristics, are shifting the focus of their work over tohelping enterprises deal with reorganization, consolidation, reform of

technology and equipment, and improving management levels; they have givenoutstanding support to enterprises in exploiting their potential, reforming,reorganizing, producing well-known, exchange-generating products, andhorizontal economic integration. In the course of the year they issued 5.28

billion yuan in loans to township enterprises; loans for circulating fundsincreased by 63 percent over the previous year.

3. Scientific and technical loans to agriculture increased more than ordinaryloans. As the rural commodity economy develops and the transmission of

economic information is speeded up, peasant demands for the application ofscientific methods are becoming more pressing; given this change in the demand

for funds, the credit cooperatives are giving priority to supporting model,scientific peasant households that adopt superior varieties and breeds,scientific fertilizer application, expanded use of compound feeds, and variousagricultural technologies, and loans issued for these purposes increasedsharply over previous years.

III. Greater Exploitation of Internal Potential

The province's credit cooperatives adopted varied measures to strengthenaccounting; this exploited their internal potential and strengthened theircapacity for self-transformation and self-development. Four changes occurred:

1. Deposit patterns became more rational. In the last year, the cooperativescontinued to pay attention to readjusting deposit patterns. They changed theartificial approach of encouraging fixed deposits and enthusiastically pursued

deposits by individual industrialists and businessmen and collective deposits,raising the proportion of low-interest deposits.

2. Overdue loans were activated. In order to activate credit funds, severalmeasures were taken: the "Lending Contract Regulations" were given greaterpublicity, which had a positive effect on recovering overdue loans. Loans tolarge, specialized households were cut back; cutbacks and recovery wereespecially strict for those households lacking an assured supply of rawmaterials, whose products were not selling well, and whose cechnical levelswere low. The clearing up of small, old loans was promoted, with thesettlement of each being recorded, and recovery plans were implemented. In1985, 19.85 million yuan in small, old loans from before 1983 was recovered,accounting for 15 percent of the balance at the start of the year; 108.1million yuan in risky loans was enthusiastically cleared up and recoveredaccounting for 71.2 percent of the total; loan arrears of 3.66 million yuan,or 66.5 percent of the total, were collected from closed enterprises.

79

3. Costs were lowered. While strengthening financial management, cooperativeseverywhere paid attention to controlling costs, especially medicalexpenditures and agents' fees. Operations handled by credit cooperatives maynot be turned over to credit agencies, nor can operations transacted by fieldpersonnel be recorded in agency ledgers to increase agency remunerationwithout justification. It was also stipulated that credit agencies without acertain amount of deposits will not be allowed to issue loans, therebylowering costs.

4. The economic responsibility system was perfected. In order to fullymobilize the enthusiasm of credit cooperative staff and workers, theprovincial banks have formulated and completed an accounting method based onamount of surplus. All the credit cooperatives have instituted a personalresponsibility system combining responsibility, authority, and profit, basedon a 100-point assessment. Most of the cooperatives have implemented a double

floating system for wages and bonuses in order to clarify job authority,achieve responsibility, make stringent assessments, and distinguish rewardsand penalties, which has fully mobilized the enthusiasm and creativity ofstaff and workers. In order to continue realizing a surplus in eachcooperative, banks at all levels have reinforced their guidance of low-profitcooperatives and adopted methods of staying with the cooperatives so as toassist those making low profits to transform their backward status and achievebetter results.

13322CSO: 4006/690

80


SICHUAN TOBACCO SALES

Chengdu SICHUAN RIBAO in Chinese 7 May 87 p 4

[Article by Yang Xiaohan [2799 1420 1383]: "This Year's Cigarette Sales Trendsin Sichuan"]

[Text] Tobacco sales in Sichuan this year broke through the two million packthreshold, increasing by 10.3 percent over 1985; the increases for grades A,B, and C were 70 percent, 17 percent, and 10 percent, respectively, whilegrades D and E declined by 14 percent. It is forecast that this year cigarettesales in Sichuan will continue their steadily rising trend, with total salesof approximately 2.1 million packs. These sales will be characterized asfollows:

1. The proportion of cigarettes produced within the province will increase,

and sales in rural areas will continue to rise. With further readjustments inthe product mix, improved quality, and increased production of varieties thatsell well, it is forecast that cigarette production in Sichuan will reach 1.45million packs this year; this figure will include 100,000 packs of grade Acigarettes, and 800,000 packs of grade B. Cigarettes produced in Sichuan willaccount for approximately 70 percent of total sales. Rural cigarette saleswill reach 1.5 million packs, an increase of 11 percent over 1986, and ruralsales will account for about 70 percent of the total.

2. The supply of grade A cigarettes will increase, but the gap between supplyand demand will be greater. According to forecasts, the demand for grade Acigarettes in Sichuan will account for about 15 percent of total marketdemand; because of restrictions due to the availability of raw andsupplemental materials and on supplies from outside the province, it isforecast that the supply of grade A cigarettes will be about 200,000 packs, an18 percent increase over 1986. Because of an inadequate supply of grade Acigarettes and higher rural consumption levels, consumers will turn to grade Bcigarettes. Sales of grade B cigarettes are forecast at 1.0 million packs thisyear, an increase of 28.37 percent over last year, accounting for about 47.62percent of total sales. Sales of grade C cigarettes will be around 600,000packs, basically the same as or slightly above last year. Grade D cigarettesare continuing their downward trend, with sales of about 300,000 packs, a dropof 23 percent from 1986.

3. Cigarette types are tending towards blends and safety. The blendedcigarette products produced in Sichuan, such as Huaxi, Juyongguan, Konglong,Baoguang, and Shuangye, will win the favor of consumers.

13322CSO: 4006/689 81


BRIEFS

DAIRY CATTLE--Beijing, 5 Jun (XINHUA)--The number of dairy cattle in China hasincreased 125 percent since 1982 to reach 1.84 million. According tostatistics released at a national meeting of the country's dairy cattleassociation, "last year, milk output hit 2.86 billion liters, which was 76.5percent higher than in 1982." China has been breeding more high-yield dairycows, and has raised 8.6 million draught cattle and buffalo which are good forproducing both milk and beef. Since 1983, China has imported over 10,000holstein cows, 400 stud bulls, and 40,000 ampules of frozen semen forartificial insemination. "Milk projects, aided by the World Food Program insix major cities, are doing well," an official attending the meeting reported."China is encouraging individuals to join state and collective projects inraising dairy cows," the official said, adding local animal husbandry officesand branches of the association are offering assistance in farm design, milkprocessing and marketing, and breeding techniques. [Text] [Beijing XINHUA inEnglish 1210 GMT 5 Jun 87 OW] /9599

SICIU/AN FARM MACHINE SALES--In tile first quarter, tile industrial outputvalue of the farm machine industry in Siciiuan Proviice was 184,900,000yuan, a 23.6 percent increase over tihe same period in 1986; total saleswere 111,600,000 yual, al 87.5 percent increase ovei: thte same period ill1986. [Excerptl [Beijing ZHONGGUO NONGJI1iUA B3O in Chinese 16 Hay 87 p 31

'lAl1jiN FARM IIACHIINE SALES--la the first quarter, tne iindustrial outputvalue of the farm machine industry in 'lianjin Hunicipality was 8,858,500yuan, a 36.2 percent increase over tlie same period in 1986, aid totalsales were 34,530,000 yuan, a 26.65 percent increase over tue same periodin 1986. [Excerpt] [Beijing ZI-IONGGUO NO1UJIJA B3AO ill ¢uiiuese 23 Ilay 87p 31

YUNNA14 SUGAR OU'fPU1--During tile pressing season just concluded (I Dec86-30 April 87) gross output of sugar in Yunnan Province was 521,500tons; 4,740,000 tons of sugarcane were supplied to sugar refineries illthe province, an increase of 700,000 tons over the last pressing season.As of 30 April, Yurnnan had shipped 200,000 tons of sugar to otiierprovinces, an increase of 80,000 tons over tile last pressing season.[Excerpts] [Kunming YUNNAN RIBAO ill Chinese 14 Hay 87 p 11

HUBEI FARM PRODUCT SALES--In the first 4 nontlhs of 1987, Iiubei Provincesold 186,400 tons of cotton, an increase of 4Z.1 percent over tne sameperiod in 1986. During the same period, ramie sales increased 158percent; at the end of April 252 tons were in stock, a 69.4 percentdecrease. Jute and ambari hemp sales increased 55.3 percent in the sameperiod. [Excerpts] [Beijing NONGi11N RIBAO in Chinese '0 Hay 87 p /.

CSO: 4006/758

SOCIAL

CULTURE MINISTRY URGES PROTECTION OF RELICS


[Text] Beijing, 8 Jun (XINHUA)--The Ministry of Culture has urged

Chinese cultural workers at all levels to give top priority to the

protection of relics and contribute to the crackdown on the smuggling

of cultural relics abroad.

In a circular issued recently, the ministry said that employees in the

cultural administration departments should help publicize the public notice

issued by the State Council late last month on cracking down on the

robbing of ancient tombs and relics smuggling abroad, which have been

running rampant in recent years.

Museums at all levels must conduct surveys on the safety of their own

relics and complete registering of all the relics within this year,

according to the circular.

The ministry noted that special teams should be organized in areas nearancient tombs, ruins of ancient buildings and kilns. It recommended thatlocal people be recruited for this purpose.

Promotion of officials and assessment of professional posts for employeesin cultural administration departments will depend on how well relics

under their care are protected, according to the circular.

Cultural workers have also been urged to cooperatewith police departmentsand customs in the crackdown on robbery of ancient tombs and relics

smuggling.

/9604

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SOCIAL

BRIEFS

NEW PUBLISHING HOUSE--Beijing, 9 Jun (XINHUA)--A publishing house whichwill publish books at writers' own expense was set up here today. Thenon-profit Wenjing publishing house will publish all kinds of academicworks, selected works and reference books. The publishing house willoperate under the leadership of the Beijing Publishing House and itsestablishment has won approval of the media and publications administra-tion of the People's Republic of China. The establishment of thepublishing house will make it easier for writers to get their researchbooks published and they themselves will be responsible for the distri-bution. Those who apply for publication of their books must be Chineseincluding compatriots from Taiwan, Hong Kong and Macao, as well as overseasChinese. [Text] [Beijing XINHUA in English 1208 GMT 9 Jun 87] /9604

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JINAN MR LEADER SONG QINGWEI SPEAKS ON ARMY-CIVILIAN UNITY

SK100341 Jinan Shandong Provincial Service in Mandarin 2200 GMT 9 Jun 87

[Text] On 8 June, at the telephone conference of the Jinan Military region onstrengthening unity between the army and the people and between officers andmen, Song Qingwei, deputy political commissar of the Jinan Military Region,pointed out the necessity of carrying forward the fine tradition of the regionand vigorously strengthening the unity between the army and the people andbetween the army and the government in the course of building the grassrootsorganizations.

He said: Over the past few years, the relations between the army and thegovernment and between the army and the people have been good in general,though some problems remain. Owing to the lack of the mass viewpoint and thesense of policies and disciplines, a few comrades have violated discipline inrelations with the masses; and some units have failed to conscientiouslyhandle such cases that emerged in the PLA units.

Song Qingwei stressed: At present, we should vigorously strengthen the unitybetween the army and people; should go all out to carry forward the goodtraditions of maintaining unity between the army and people, supporting thegovernment and cherishing the people, and stressing the three main rules ofdiscipline and the eight points for attention; and should cherish theenergetic support and cordial concern of the local government and the peopleto the PLA units. We should conduct a large-scale inspection on maintainingdiscipline in relations with the masses, and appropriately handle the problemsin this respect. In addition, we should continue to participate in theconstruction of the local key projects and the social public welfareundertakings, help the masses extricate themselves from poverty and becomeprosperous, extensively launch the activities of learning from Lei Feng anddoing good things, and maintain a close relation between the army and thepeople in order to greet the 60th anniversary of the PLA founding with new

achievements.

/12913CSO: 4005/748

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AIR FORCE TRAINS PILOTS FOR FOREIGN COUNTRIES.


[Text] Shijiazhuan, 10 June (XINHUA)--An academy of the Chinese People'sLiberation Army Air Force division has trained fighter pilots, navigators andother military personnel for nine countries over the past 30 years.

Known as China's "cradle of fighter pilots," the academy has also turned outthousands of qualified fighter pilots for the country's own Air Force and Navysince the school was founded in December 1949.

Many of the foreign pilots trained at the academy have become high-rankingofficers when they returned home, and some have even become commanders.

Wang Hai, commander of China's Air Force, and Li Yongtai, the Air Force'sdeputy commander, are also graduates of the Academy.

The Academy began offering training to foreign pilots in 1954, and cooperationand exchange with other countries has steadily increased. Over the past 30years, the Academy has hosted visitors including foreign diplomats andmilitary delegations representing 90 countries.

"The academy has also sent some military personnel to visit other countries orcomplete military training abroad," an officer from the academy told XINHUA.

"Now the Academy uses 21 types of planes in teaching and training, includingChinese-made jet trainer aircrafts," the official said, adding computerizedflight simulators are now used instead of conducting actual flight trainingsession, and pilots can learn take-off and landing, in-flight operations, andacrobatic and formation maneuvers by using the simulators.

Academy trainees are selected from the graduates of other pilot schools.During their training at the Academy, they study 15 subjects on aeronauticaltheory including aeromechanics, aircraft structure, flight dynamics,navigation, military skills and aeronautical psychology.

The official said, "nearly 1,000 films and videos on these subjects have

proved to be effective in raising teaching quality."

Beginning this August, the Academy will recruit all students from the ranks of

college and university graduates.

/12913 86CSO: 400/101


PLA NAVY IMPROVES OCEANGOING LOGISTICS

0W090230 Beijing XINHUA Domestic Service in Chinese 2347 GMT 6 Jun 87

[By Huang Caihong]

[Text] Beijing, 7 June (XINHUA)--Li Chunming, Director of the PLA NavyLogistics Department, told a XINHUA reporter that the Chinese Navy now has thecapability of ensuring logistics to fleets at sea. Naval vessels on the highseas in the Pacific and Indian Oceans are now able to obtain fuel, freshwater,staple and non-staple foods, daily necessities, and other equipment andsupplies.

He said: The Navy Logistics Department has all types of service shipsincluding hundreds of supply ships, oil tankers, freshwater carriers, surveyships, and transports. The total tonnage of service ships now is nearly fourtimes that of a decade ago.

[RENMIN RIBAO of 8 June quoted this XINHUA report as follows: "The totaltonnage of the service ships has increased by over 200 percent over that of 10years ago."] In recent years, the department has also sent out oceangoingvessels to supply fuel and freshwater. In coordination with warships, thesesupply ships can loan dry or wet cargo from either the port or starboard sideand facilitate personnel rotation. Their efficiency in providing supplies isfairly high. These supply ships have greatly increased the Navy'scapabilities in ensuring logistics.

It has been reported that the longitudinal refueling system at sea,successfully developed by the Navy and some local scientific research units,has already been installed on 1,000-ton or larger Navy oil tankers. At thesame time, the Navy has also successfully developed overhead steel ropeloading and unloading facilities for beaches or coastal areas without berthsor moorings in order to provide more ways to ensure logistics at sea. Navalmilitary harbors, airfields, supply centers, warehouses, oil depots,hospitals, maintenance centers, service ships, and other modern equipment andfacilities have formed a network to ensure logistics at sea and effectivelyraise the Navy's capabilities in providing comprehensive logistics andpromptly supporting naval fleets. When a naval fleet sailed to the SouthPacific for the first time in 1980, it was given logistics supplies nearly 60

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times at sea. Oceangoing fuel and freshwater supply ships have also carried

out their tasks in various forms and weather conditions. In May this year,the oceangoing supply vessel "Fengcang" successfully supplied oil and food

from its port, starboard, and stern to two cruisers and one convoy ship at the

same time in the Pacific Ocean. This is something new in the annals of the

Chinese Navy.

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LIAOWANG OUTLINES GROWTH OF PLA AIR FORCE MISSILE UNIT

HKI00835 Hong Kong LIAOWANG OVERSEAS EDITION in Chinese No 23, 8 Jun 87

[Article by Cai Shanwu (5591 0810 2976): "The Growing Air Force Surface-to-Air Missile Unit"]

[Text] China's Air Force has developed into a modern army with combined armsunits composed of air units, airborne units, surface-to-air missile units,antiaircraft artillery units, radar units, and communications units. Ofthese, the development of the SAM units is particularly conspicuous.

This Air Force SAM unit has grown from the seminal unit praised by the lateMarshal He Long.

During the late 1950's, China's Air Force established its first SAM unit. Theofficers and men of this unit left their footmarks from the windy and dustynorthwest to the cloudy and drizzly south. In the short period of only a fewyears, they succeeded in shooting down U-2 high-altitude reconnaissance andspy aircraft which intruded into China's territorial air space, on fiveoccasions.

Over the past 20 years or so, the Central Military Commission has cited theunit on many occasions. A total of 9 groups and 240 individuals, and 4 groupsand 110 individuals of this unit have won first and second class meritcitations, respectively. In January 1964, the Ministry of National Defenseconferred the title "Combat Hero of the Air Force" on Yue Zhenhua, formerchief of the unit. In June the same year, the Ministry of National Defenseconferred the title "Heroic Unit" on the unit. On 23 July that year, MaoZedong, Zhou Enlai, and other leaders met with all officers and men of theunit at the Great Hall of the People.

With the growth of the people's Air Force, this seminal unit has continuouslysent talented people to Air Force units in all localities. As a result, SAMunits developed into divisions (now changed to brigades) and regiments,constituting an important combat force in the Air Force.

To speed up the modernization program, the Air Force leading bodiestransferred large numbers of intellectuals from the organs, troops, andacademies to the unit to undertake command and technological work andvigorously strengthen the building of the missile academy. More than 80

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percent of the officers at the brigade, regiment, and battalion levels of theunit have college education. Some of the brigade commanders are graduatesmajoring in missile science. They are the backbone of army modernization.They have led the officers and men in conducting scientific research andapplying new technology to transform existing equipment. More than 40scientific and technological results have been achieved in recent years.Thanks to the popularization of these results, an integrated system fromweaponry to training of qualified personnel, from combat training to tacticalstudy, and from use and maintenance to deployment has taken shape in this newunit.

Microcomputer technology has been applied extensively in the unit's trainingand duty work. Progress has also been made in applying software to simulatedoperations. The antiaircraft simulated system developed by scientists canmake quantitative analysis of assumed air-raids and the course and results ofantiaircraft operations, thus providing a basis for commanders to maketactical studies, assess operation plans, and decide on modes of operation.

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PLA DEVELOPS NEW ARTILLERY COMMAND SYSTEM

HK080917 Beijing GUANGMING RIBAO in Chinese 25 May 87 p 2

[Report by Guo Jianyao (6753 1696 6460) and Ma Xinling (7456 2450 7325):"Platoon Leader Cao Jinlong and Others Develop an•Advanced Artillery ModernCommand System"]

[Text] After studying assiduously, Cao Jinlong, Lu Xiang, Jiang Tao, and RenXiaotong, four university graduate platoon leaders of a PLA artillery brigade,succeeded in developing an artillery modern command system of an advancedworld level. Last April, in line with their special contributions, the PLAunit party committee awarded each of them a Citation of Merit, Third Class,and gave them promlfbtos.

Two years ago, Brigade Commander Yan Xueyi led the four platoon leaders mvstarting the development of an artillery modern command system. During this'..period, with the all-out cooperation of 207 research institutes, they ate andlived in the institutes for 6 months, quietly immersing themselves in data,materials, and experiments. After upgrading products four times, theysucceeded in developing the present artillery modern command system of anadvanced world level, which reduces the time for spotting objectives to firingshells by about 3 minutes and which enables each detonation point toaccurately cover the target. The customary practice of human eye observation,manual calculation, decisionmaking by experience, and oral command has beenreplaced by laser observation, microcomputer calculation, scientificdecisionmaking, and digital command. At the end of last year, the systempassed inspection tests and was awarded a Citation, First Class, by theGeneral Staff Department. The application of this command system has createda new record for quick reaction in the history of our artillery.

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BRIEFS

PARATROOPERS NOW ALL WEATHER FORCE--Beijing, 9 June (XINRUA)--China's Airborne

Landing Force is now capable of operating in all meteorological andtopographical conditions, according to Li Lianghui, commander of the force.

Another senior officer said that the force now consists of infantry,artillery, engineering, antichemical warfare and air units. "Our paratroopershave conducted exercises in cooperation with the ground forces, Navy, AirForce and militiamen over the past few years," he said, adding that they havealso helped rescue flood and earthquake victims, and put out forest fires.There are special brigades for training new recruits and others for trainingofficers, and a research institute for the study of foreign paratroop units.To date, 1,012 officers have graduated from military academies and colleges.[Text] [Beijing XINHUA in English 1210 GMT 9 Jun 87 OW] /12913

ADMINISTRATIVE COSTS CUT--Beijing, 8 June (XINHUA)--During the rirst fivemonths of this year, administrative expenditure of the Air Force decreased bymore than 10 percent over the same period last year. At the beginning of thisyear, leading organs of the Air Force formulated eight measures for increasingincome, decreasing expenditure, and practicing frugality; put forward clear-cut targets for curbing expenditures on conferences and controllinginstitutional purchasing power; defined authority for making examinations andgiving approvals; and frequently dispatched work teams to inspect andsupervise grassroots army units. Leading cadres at all levels have exercised

strictness in making examination and giving approvals. This reporter examined

a dozen or so application for purchasing restricted commodities at thefinancial department of the Air Force and found that restricted commoditiesapproved for purchasing were well within the regulations and that purchases ofluxurious and nonproductive commodities such as sedans, videocassetterecorders, air conditions, and refrigerators were all disapproved. Savingfrom the above items alone amounted to more than 660,000 yuan. [By reporterSun Maoqing] [Tpxt] [Beijing XINHUA Domestic Service in Chinese 0158 GMT 8Jun 87 OW] /12913

JIAGXI MD TRAINS COUNTY CADRES--The Jiangxi Military District started atraining class for directors of county people's armed forces departments andchiefs of county military affairs section on 1 April. Present at the openingceremony were Comrade Wang Baotian, commander of the military district;Comrade Shen Shanwen, deputy commander of the military district; Comrade WeiChangan, deputy political commissar of the military district; and Comrade Chen

Lijiu, director of the political department of the military district. WangBaotian spoke during the ceremony. Shen Shanwen serves as the director of thetraining class. The trainees will be taught theories on building army reserveforces and the militia and reserve service work. They will also be givenmajor militia weapons training. [Text] [Nanchang Jiangxi Provincial Servicein Mandarin 1100 GMT 2 Apr 87 OW] /12913

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SOUTHWEST REGION REGIONAL

CHENGDU ANNOUNCES RESULTS OF CRACKDOWN ON CRIME

HK070211 Chengdu Sichuan Provincial Service in Mandarin 0000 GMT 7 Jun 87

[Text] The Chengdu city public security bureau held a press briefingyesterday, which announced that the city public security organs startedtheir first concentrated drive to catch and arrest offenders on 4 Junein the course of the struggle to crack down on active criminals and rectifypublic order. The five districts of the city and Wenjiang, Dayi, andXinjin counties launched the drive together. By yesterday, they hadarrested 567 criminals of various categories, conducted education throughlabor for 361, and educated 27 juvenile offenders. They had alsosmashed 233 criminal gangs. Over 10,000 public security cadres andpolicemen and activists in joint protection and public order work tookpart in the drive to step up patrols and catch criminals. They alsocleaned out premises where criminals engage in conspiratorial activities.

During the struggle, over 700 bicycles, 30 motorcycles, and other materialsand cash were recovered, with a total value of nearly 800,000 yuan.These items and more money are now being returned to their owners.

When a reporter of this station asked at the briefing why this concentratedcrackdown is being conducted at the present moment, a responsible officialof the city public security bureau said: We have persistently waged thestruggle to crack down on serious crime ever since 1983. As a resultthere has been a marked turn for the better in public order in Chengdu.However, due to the fact that the class struggle will exist to a certaindegree for a long time to come, and decadent bourgeois ideas and lifestyles will penetrate in the wake of opening up to the world, at present,with the increased flow of people, money, and materials in Chengdu,certain incorrigible criminals have gone back to their old ways afterfeeling disheartened for a time. There has been an increase in seriouscrime in Chengdu this year, especially in three respects:

1. There has been an increase in murder, theft, and injury cases.

2. There has been a revival of illegal and criminal cases of thug gangsinvolved in theft, snatching, taking liberties with women, and so on.

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3. People who commit burglary and pick pockets have become very arrogant.

In order to promote a turn for the better in public order, do stillbetter in reforms, opening up, and invigoration, and protect life andproperty of the state and people, it was therefore essential to carryout a concentrated crackdown to uphold the dignity of the law.

Although this concentrated action has now concluded, the public securityorgans will continue to crack down hard on serious crime. We areunswerving in this. We have also formulated specific plans and measures.

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RENMIN RIBAO LAUDS MODEL SCHOOL IN WUHAN

HK081051 Beijing RENMIN RIBAO in Chinese 22 May 87 p 3

[Report by Liu Xueyan (0491 7185 7159): "Liangdaojie Middle School inWuhan City Rectifies Its Guiding Thought for Running a School"]

[Excerpts] Liangdaojie Middle School in Wuhan, which used to be discriminatedagainst and regarded as a "collecting post of inferior pupils" in thepast, has now turned out to be an advanced collective of the country'seducational system. If this school had a "magic weapon," then this wouldbe the school's clearly defined guiding ideology for its operation--the idea that transforming an inferior pupil is just as glorious a jobas fostering a superior pupil.

Liangdaojie Middle School was a junior secondary school which evolvedfrom a primary school in 1978. Around this school there are a numberof key middle schools run by the province, the city, and the district.Over 80 percent of this school's pupils are those who have failed to gainadmission to these schools around it. Many of them did not study wellduring their primary years, and they are ignorant of morality and legalsystem. Some of them got a mere 17 marks in total for the two subjectsof Chinese language and mathematics in their entrance examination.

But the leading people of Liangdaojie Middle School have never lost heart.They declared that they would not compete with key and brand name schoolsin terms of school conditions and proportion of pupils entering schoolsof a higher grade but in terms of their love for inferior pupils and theproportion of inferior pupils transformed into good ones. They haveencouraged teachers to focus on the demand that the modernization programhas made on the cultural quality of the whole nation, and they have putforth the slogan that "transforming an inferior pupil is just as gloriousa job as fostering a superior pupil."

In the past 8 years, the more than 100 teachers and staff members of thisschool have devoted their entire energy and thought to building a goodschool and they have done an excellent job indeed: the average propor-tion of inferior pupils in a class has been reduced from 80 percent whenthe class enters the school to 20 percent on graduation; the pupils'

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passing percentage has risen from 11 percent in 1981 to 93 percent in1986; and the percentage of juvenile delinquency has always remained zero.Liangdaojie Middle School also occupies a place in subject performancecontests and sports games for pupils held by the state, the province,and the city. Now many parents come to ask the school to admit theirchildren. Some parents even intend to transfer their children currentlystudying in province- or city-run key middle schools to LiangdaojieMiddle School.

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HENAN CIRCULAR ON PARTY MEMBERS' VANGUARD ROLE

HK050929 Zhengzhou Henan Provincial Service in Mandarin 2200 GMT 4 Jun 87

[Text] The organization and propaganda departments under the provincialparty committee and the provincial discipline inspection commissionrecently issued a joint circular announcing the decision that, starting

June this year, it is imperative to spend 6 months conducting discussionsamong party members throughout the province on the image of party members

in the new period, and on how to give full play to the exemplary vanguardrole of party members.

The circular said: In conducting such discussions, party organizationsat all levels must organize their party members, and particularly their

leading cadres, to conscientiously study the party constitution andnorms, and the two books, namely, "Uphold the Four Cardinal Principlesand Oppose Bourgeois Liberalization," and "Build Socialism With ChineseCharacteristics." In addition, they must guide their party memberstoward fully understanding the reasons for party members to give fullplay to their exemplary vanguard role in the new period, and the ways togive full play to such a role in the new period. They must also enablethe vast numbers of party members to further strengthen their faith in

communism, to foster the idea of wholeheartedly serving the people, toenhance their party spirit and their sense of responsibility to the party

organization and discipline, and to strengthen their sense of the legalsystem, their sense of policy, and their sense of the masses. Moreover,

they must enable their party members to conscientiously lead the massesin correctly implementing the line, guiding principles and policiesadopted since the 3d Plenary Session of the llth CPC Central Committee,

for the purpose of making positive contributions to building the twocivilizations.

The circular stressed: In conducting such discussions, we must upholdthe principle of integrating theory with practice, and adhere to the

guiding principles for sticking to positive education, encouraging thefree airing of views, and mediating between and guiding different parties.Party organizations at all levels must treat the task of successfully

conducting such discussions as an important item on their agenda. In

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conducting such discussions, all departments under party committees mustact in close coordination, strengthen the work of supervising, checkingup on, and guiding such discussions, and constantly promote the in-depthdevelopment of such discussions. Responsible party organization comradesat all levels must take the lead in studying documents, participating indiscussions, and writing articles in this regard, and t~ake concreteactions to guide their subordinate units' party members to successfullypromote such discussions.

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BRIEFS

STUDY COURSE IN SICHUAN--According to SICHUAN RIBAO, a course run by theparty committee of the provincial organs to study the two books "BuildSocialism With Chinese Characteristics" and "Adhere to the Four CardinalPrinciples and Oppose Bourgeois Liberalization" concluded on 3 Juneafter 2 weeks in session. The 220 participants included leading cadresresponsible for political and ideological work in the various organs,secretaries of party committees, and propaganda and theory cadres.Nie Ronggui, deputy secretary of the provincial party committee, andGu Jinchi, member of the standing committee of the provincial partycommittee and vice governor, lectured to the participants on the impor-tance of studying these two books. This study course trained someorganizational and guidance forces for the study of the two books bycadres at all levels in the provincial organs. [Excerpts] [ChengduSichuan Provincial Service in Mandarin 0000 GMT 9 Jun 87] /9604

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NORTHWEST REGION REGIONAL

XINJIANG HOLDS UNITED FRONT, NATIONALITIES WORK CONFERENCE

Yan Mingfu Addresses Meeting

HK060303 Urumqi Xinjiang Regional Service in Mandarin 1200 GMT 5 Jun 87

[Text] Yan Mingfu, director of the CPC Central Committee United Front WorkDepartment, spoke at the regional conference on united front and nationalitywork today. He expressed the hope that the united front and nationality workcadres of all nationalities will do even better in united front work and makeeven greater contributions in consolidating and expanding the patriotic unitedfront, strengthening nationality solidarity, promoting the building ofsocialist material and civilization in Xinjiang, and stimulating the commonprosperity of all nationalities.

Yan Mingfu said: The people of all nationalities in Xinjiang have gloriousrevolutionary traditions. They have made tremendous contributions in thegreat undertaking of defending and building the motherland's border. Theparty committees at all levels attach great importance to united front,nationality, and religion work. A great deal of careful work has been done inimplementing the united front policies. This is now one of the best periodsfor united front work since the founding of the state.

Yan Mingfu said: Doing a good job in nationality work is a great affair ofprimary importance in Xinjiang. The historical experiences of the past fewdecades have proved that China's system of autonomy for nationality regions iscorrect and superior, and accords with China's national conditions. It isable to withstand the test of history. This system has already become one ofthe aspects of building socialism with Chinese characteristics. We must stepup coordination in all aspects, and further implement the law on autonomy ofnationality regions. We must continue to train large numbers of minority-nationality cadres. We should not only pay attention to their number; moreimportant, we must pay attention to improving their quality.

We must put economic work in the first place in nationality work. We mustmobilize the forces of all sectors to support poor minority-nationality areas.

Yan Mingfu said: We must further strengthen the great solidarity ofnationalities. The Xinjiang Uygur Autonomous Region is a great family ofnationality love and friendship and is also a member of the great motherland'sgreat family of nationality love and friendship; it is an inseparable part of

100

the great motherland. What is most needed between the fraternal nationalitiesis trust and unity. We believe that as a result of long-term party educationand testing, the cadres and masses of all nationalities in Xinjiang fullyunderstand the great importance of mutual trust and will spontaneouslypreserve nationality solidarity.

Yan Mingfu said: Doing a good job in work concerning religion is of greatsignificance in Xinjiang. Protecting freedom of religious belief is a long-term basic policy of the party on the question of religion. The mostfundamental thing in doing a good job of work concerning religion is tostrengthen leadership and control.

Editorial Promotes Nationality Work


[Report on 7 June XINJIANG RIBAO Editorial: "Raise United Front andNationality Work to a New Level"]

[Text] The editorial says: Patriotic united front work has entered a newhistoric stage since the 3d Plenary Session of the ilth CPC Central Committee.In accordance with the new situation and characteristics of this work in thenew period, the future main tasks of united front work in Xinjiang are to baseefforts on the region's realities, focus on doing a good job in nationalityand religion work, make a success of work regarding the democratic parties andthe CPPCC, promote economic united front work, mobilize all positive factorsto the maximum extent and unite all forces that can be united, to serve theeffort to consolidate and develop the political situation ofostability andunity in the region and speed up of building the two civilizations inXinjiang.

The editorial points out that Xinjiang is a multinationality region, and doinga good job in nationality work is a major affair of primary importance. Wemust understand more clearly that the general guiding idea for nationalitywork in the new period is to adhere to the four cardinal principles and to thebasic national strategy of reform, opening up, and invigoration; in closeconnection with the reality of the minority-nationality areas and the minoritynationalities, basing the work on the equality, solidarity, and progress ofthe nationalities, on learning from each other, and becoming rich together, weshould take economic construction as the core in achieving all-toundpolitical, cultural, economic, and cultural development of the minoritynationalities, continually consolidate the new-style socialist nationalityrelations, and attain the common prosperity of all nationalities. We muststrive to implement this guiding idea in our practical work.

The editorial says: United front and nationality work is important partywork. To raise this work to a new level in Xinjiang, the party'committees atall levels must further strengthen and improve leadership over it and place itin an important positive on their agenda. The party and government leadershipat all levels in the region must seriously implement the spirit of this unitedfront and nationality work conference and strive to create a new situation inthis work. They should further mobilize the initiative of all nationalities

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and sectors, the democratic parties, and non-party patriotic figures, tostrive to fully implement the line, principles, and policies since the 3dPlenary Session of the llth CPC Central Committee and speed up the building ofthe four modernizations in Xinjiang.

Ismail Amat Promotes Nationality Solidarity


[Text] Ismail Amat, minister of the State Nationalities Affairs Commission,pointed out in a speech at the regional united front and nationality workconference on 6 June that in doing a good job in nationality work in the newsituation, it is essential to act in the spirit of the two basic points in theline of the 3d Plenary Session of the llth CPC Central Committee, that is,adhere to the four cardinal principles and adhere to the general principle andpolicy of reform, opening up, and invigoration.

Ismail Amat said: the minority-nationality people have profoundly felt from along period of historical experience that only by adhering to the fourcardinal principles can the liberation they have gained be completelyguaranteed, can nationality solidarity be ensured, and can we ensure that thenationalities will advance along the socialist road and proceed to communismin the future. Only by persevering in reform, opening up, and invigorationcan the minority-nationality areas continually develop their social productiveforces, promote their economic and cultural construction, improve the materialand cultural living standards of the nationalities, ensure the commondevelopment and prosperity of each minority nationality, and thus buildsocialism with Chinese characteristics.

He pointed out: Nationality work must be centered on economic work. It isalso necessary to do a good job in strengthening nationality solidarity,practicing the autonomy of minority-nationality regions, and developingnationality education, culture, science, and public health. The minority-nationality areas must simultaneously build socialist material and spiritualcivilization.

Ismail Amat stressed: We must seriously implement the law on autonomy ofminority nationality regions, develop socialist nationality relations ofequality, solidarity, and mutual assistance, stimulate the initiative of allautonomous localities and nationalities in acting as master of the house,further promote economic and cultural construction, and speed up the all-rounddevelopment of the autonomous localities.

Ismail Amat pointed out in conclusion: We should further strengthen the greatsolidarity of the nationalities. This is the guarantee for the state to enjoya long period of tranquillity, smoothly build the four modernizations, andcarry out reform and opening up. We must further develop the excellentsituation of nationality solidarity, do a still better job in this respect,and strive for new developments and achievements in nationality work in theregion, to make still greater contributions to nationality work throughout thewhole country.

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HONG KONG, MACAO

ZTS COMMENTS ON HONG KONG POLITICAL REFORM

HK070436 Hong Kong ZHONGGUO TONGXUN SHE in Chinese 1155 GMT 5 Jun 87

["Short" commentary by Qi Jing (7871 4842): "Why Should There Be Factions inViewing Political Reform"--ZHONGGUO TONGXUN SHE headline]

[Text] In focusing on the review of the political structure conducted by theHong Kong Government, it is noted that a hot debate of various opinions isgoing on. During this process, some phenomena are really puzzling.

Some people propose to describe those people favoring the holding of directelections in 1988 as the "democratic faction" while calling those people withdifferent views the "conservative faction." This is worthy of discussion.First, as direct elections are only one of the democratic means, people shouldnot equate direct election with democracy. Second, those people who do notsupport holding direct elections in 1988 do not completely oppose the directelections nor the implementation of democratic politics. They just believethat its not appropriate for the Hong Kong political structure to effectdrastic changes during this period of transition for fear that the drasticchanges might affect stability and prosperity and that the development of apolitical structure should converge with the basic law and proceed in anorderly way, step by step. Therefore, it is not fair and precise to callpeople of this opinion as the "conservative faction." Today, on the issue ofdirect elections, he might hold an opinion of opposition; and tomorrow, onanother issue, he might express his approval. On the contrary, people whosupport holding direct elections today might oppose a certain policy of theHong Kong Government tomorrow.

Some other people said that the "pro-China factions" do not support holdingdirect elections in Hong Kong in 1988. This is also worthy of discussion.

Although there are some people in Hong Kong who do not like tne localistsystem in China, most of them support the policy of reform, opening up to theoutside world, and invigorating the domestic economy, believing it to be acorrect principle to vitalize China. However, these people are also of twodifferent opinions on direct elections in 1988. In this sense, it is verydifficult to tell who is in the "pro-China faction" and who is not in the"pro-China faction."

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Some people regard all the personages who are NPC deputies, CPPCC members, orthe members of the Hong Kong Basic Law Drafting Committee or ConsultativeCommittee as the "pro-China faction." Nevertheless, not all these personagesoppose holding direct elections in Hong Kong in 1988. Are not there somepeople among the members of the Basic Law Drafting Committee who loudlyappealed for holding direct elections in 1988? And many of the personagesproposing to prudently consider the issue of direct elections in 1988 are theso-called "pro-China faction" in some people's eyes.

In fact, it is a very normal and natural thing that the people in Hong Konghave different opinions and even debate on the development of the politicalstructure in Hong Kong. However, it is not conducive to the expression ofdifferent opinions as well as the unity of the people in Hong Kong to classifypeople with different opinions into different factions, imply that some peoplehave this or that political background, or even regard opposition or notholding direct elections in Hong Kong as a standard to group the Hong Kongpeople to different factions, at a time the Hong Kong people have not yetfully aired their opinions on the development of the political structure.

/9599CSO: 4005/749 END

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